We work, we earn, we save. We invest simply and sensibly. Perhaps we’ve accepted the challenge to live on half. Eventually, we have reached our magic number.
We’ve got 25, 30, or 33.33 years’ worth of anticipated annual expenses for a 4%, 3.33%, or 3% withdrawal rate spread across various tax-deferred, tax-advantaged, and taxable accounts.
We are experts in adding to them. But how do we best subtract from them? Today, I’d like to share our drawdown plan in early retirement.

physicianonfire.com/drawdown
Second Article:

5-steps-for-defining-your-retirement-drawdown-strategy

While @rono is a familiar and most welcome poster to us oldsters, newbies to the board during the past decade may not fully appreciate his experience and knowledge on this subject. In the days of MFO’s predecessor, Fund Alarn, rono regularly posted a daily early morning edition called “Asia and the Metals” summarizing recent developments in those areas along with point-on perspectives. Always a class act.
Personally, I’ve long held alternative type investments / inflation hedges which include a 1-3% exposure to a mining fund. That’s in addition to significant exposure to PRPFX which was earlier discussed. I don’t mind saying that even in picking my entry points carefully over the past 12-18 months I’ve ‘had my “bell rung” on the miners. The action over the past 6 months or so simply stinks. Likely some of the carnage stems from the “big boys” (hedge funds, etc) strategically pushing around the metal (playing both long and short) in what is a very thinly traded market and also trying to spook smaller investors and gain an edge. Rono mentions buying / selling by sovereign banks. And there’s the strong dollar plus the current crypto craze.
The thing to keep in mind is that the precious metals and miners can turn on a dime. It’s not unheard of for prices of either to double in a year or two - though the downside can be just as extreme. I suspect at some not too distant stage the precious metals will again be in vogue. All markets in recent years appear much more prone to running to the extremes along with public sentiment . Likely many have over-shot on both the up side and down side since the ‘07-‘09 crash. So, I continue to hold to a roughly 2% position in the p/m miners.

While the semi-annual dividend is not much to write home about especially when a shares trades $700-$800 per share, it does contribute when reinvesting it in additional shares. This is definitely a growth stock with a niche market. My small initial investment in ASML has grown significantly over the years. It is one of my top 7 stock holdings by value.

There's a difference between liquidating a fund position because one has lost faith in the fund and adjusting the holding because of performance. (Part of the original question included the example: "sell 25% of holding for each 20% gain in a year".)
Performance based adjustments can be done mechanically, based on one's target allocations.
I generally concur with observant1's approach, though I'm more inclined to let a "loser" ride longer, say three years. How much history I use depends on how the fund is managed.
If a fund has a distinctive style, I'll tend to give it more slack. One reason is that it would be difficult to replace. Another more important reason is that because of its style, it may be more likely to do better, or worse, over extended (multi-year) periods.

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Here's a good exercise, given that "everyone" thinks M* should have downgraded TPINX before now. When would you have sold it, and why?
The fund had great years through 2010, so let's look at the past decade. Here's a M* page with that data. Pay attention to the benchmark index (world gov bond index) rather than the category returns since the fund was not in that category until recently.
http://performance.morningstar.com/fund/performance-return.action?t=TPINX
In relative terms it was only in 2017 that performance began to fall apart. While it beat its index by 2½% in 2018, it underperformed substantially in 2017 (-5%+), 2019 (-5%+), and hugely in 2020 (-14½%).
After its great 2012, in 2013 and 2014 the fund returned very little (2%, 1½%). Would you have sold even though on a relative basis it did great (2013) and average (2014)?
Would you have sold at the end of 2015 after those two low return years followed by 2015 when the fund landed squarely in the middle of the pack and fell just short of its benchmark?
Surely you would not have sold after 2016, which was a fine year (6%+ vs 1.6% for its benchmark).
Would you have sold after 2017 which was the first really clear bad year on a relative basis? Or would you have waited to see what would happen?
If you did wait, would you have felt comforted by the 2018 performance when the fund again beat most of its peers and beat its benchmark by over 2%? Or would you have looked at the absolute performance of 1.27% and said to yourself: this is even worse than 2017 where it returned just 2.35%. I don't care about relative performance, I'm out?
After 2019's relative disaster, would you have called it quits, perhaps because two of the previous three years (2017, 2019) were very bad (each 5%+ under the benchmark)?
Or would you have waited for two successive bad years relative to its benchmark? It took until 2019-2020 for that to happen.

I don't think you'll have an issue. It is the leading company in its area in the semiconductor industry. I believe it is one the leaders in the lithography on wafers. With semiconductors having a shortage, there should be strong demand for their product.
Years ago, JP Morgan had a direct purchase program of ADRs. You could enroll with a minimum investment of $250 plus fees which I subscribed to for ASML. As time has passed, my shares of ASML ended up with Equiniti for safekeeping.

Still own my ASML. Have not bought any more of it since I bought it at least 10 years ago.
If you were looking for an initial point, today may be the day. Saw the price hit low-to-mid 800's per share prior to today.
I was hoping it would split again (it has split four times (97,98, 00 & 12)).

Some MFO posters have held stock positions in ASML over the years. It's down about 6% today. Any thoughts on a buying opportunity?
Thanks-OJ

Very good discussion in this thread.
Over time, I have read about a lot of buying strategies. E.g., DCA, BTD, etc. But I have never read an exit strategy. I think this is a secret sauce people do not share. I hope folks in this forum share their exit strategies.

Investors sometimes sell their best-performing stocks too soon and keep their poor-performing stocks too long.
I mostly invest in mutual funds and would consider selling a fund for the following reasons:
1) Underperforms category for more than two consecutive years.
Some funds generate "lumpy" returns which is factored into the decision.
2) Unwelcome fund company or fund manager/management team changes.
3) Significant investment strategy modifications.
4) Meaningful fee increases.
This is more art than science for me.
Selling your winners and holding your losers is like cutting the flowers and watering the weeds.
-Peter Lynch

@Derf - Take it as a “rough approximation”. Notes on the Roth conversions still exist. But the running tally of exchanges I maintain only goes back about 3 years. The day the bottom began falling out stands out in memory as I was driving up to Michigan’s UP for a few days relaxation - maybe some early fall color. Listened to the opening salvo on Sirius.
But thanks @Derf! I like to think I have a pretty good memory. :)
Added note: What I tried to show through my personal experience is how difficult or perplexing a BTFD mentality can become once markets stop cooperating with the dipper (dippee?) Once cash is expended, other methods need be found to continue the dipping process - “circuitous” methods let us say.

Howdy folks,
Interesting discussion and most everything is spot on. Hank's and the others have been doing this for a long time.
Is golds still a hedge against inflation? That remains to be seen. The market is extremely manipulated not in a conspiratorial way but legally by all the central banks and countries that wish to do so. This makes it tough to play in the short run. Almost impossible.
First of all I see gold in a couple of different ways. First I see it as a core investment for all portfolios. Say in the 3-7% range, preferably in physical bullion. More that this size of a holding is speculation. This is fine as long as you know it speculation.
I try to play gold and silver in a momentum investing manner. When they start to show some momentum, you scale in and ride it until it starts to break down at which point you scale out. There is no positive momentum at this point in time.
I mentioned silver only because I do prefer to trade it and as was pointed out, the mining stocks, particularly the juniors. All I can say is that this is where the leverage is and it can truly be nose bleed stuff.
Most precious metal mutual funds contain mining stocks and zero bullion. And you want to be careful with bullion ETF's because they are taxable at the collectibles rate if held in a taxable account. Ouch!
Permanent Portfolio PFPFX is based upon a diversified portfolio that Harry Browne came up with. He felt be diversifying between select asset classes you could smooth the market cycles. WTF knows. I do own it and have for years and will continue to do so.
As for wealth diversification, the Elder Rothschild said a long time ago, that to protect your assets you should have 1/3 invested in securities, 1/3 in real estate and 1/3 in rare art. Rare art can be a lot of things but it ain't beanie babies. In my case, I sub rare coins and bullion for the latter category.
Of note with the current market in bullion, there is a major divergence between paper price and street price. This means that official paper price is viewed as bogus by the people buying and selling physical bullion and therefore there is a very large premium attached to all bullion purchases.
and so it goes,
peace and wear the damn mask,
rono

Um no, no reasonable investor rules out a stock market correction and nothing I posted suggested that.
Yes, several of those factors I posted will likely be there for years, possibly beyond my remaining number.
What's it all mean, to me at least?
(1) It seems likely those and other positive market factors will collectively act to possibly limit/reduce the number, severity and/or duration of corrections and bear markets.
(2) I will continue with stock allocations stretched to the top of my allocation range UNTIL the risk/reward of bond funds, CDs and/or MMkts significantly improves.
(3) I will continue to BTD until it stops working.
YMMV.

I was primarily suggesting that given substantial confounding factors, there's not much that can be inferred about the utilities industry from the way it behaved in the 70s. At least not without a lot of work and guesswork that I didn't provide.
One may not be able to say much even in broad terms. Giroux wrote in the last semiannual report that "utilities, in particular, have completely decoupled from Treasury and corporate bonds unlike at any time in the last 40 years."
Regarding utility funds investing in telecom and energy, most do tend to hold a healthy slug of these. The only fund I know of that hews to the traditional path is FKUQX (NTF many places), FRUAX (NTF, $100K min at TIAA, Firstrade).

@Stillers, Are you ruling out a US stock market correction? If not, what would be the reason for the next correction and when? Seems like the long list of things you mentioned are going to be there for years.

@stillers
I would add that there are way less outstanding shares/co's to purchase over the past 10-12 years..due to private co's having easier access to capital no need to go public, sure buybacks, different less capital intensive co's such as software based need less capital so no rush to go to market, etc.
So would it be wrong to say that this is an "inflationary scenario" causing the market to continusouly rise due to supply/demand....more money chasing less product....
"Transitionary"...who knows??
Baseball Fan

@waxman who said "Leveraged loans and BDC's, stay far, far away IMHO." Would you care to elaborate?

Sure, these are very volatile beasts that can be traded but are not good long term investments, in my opinion. Since 2013 BIZD (an etf that holds BDC's) has a sharpe ratio of .40 with a max DD of 44.53%. In the leveraged loan department it depends on the issue, but a popular CEF like OXLC had an over 60% drawdown over that same period. As for HNDL, like most anything else, it needs to be watched but the ETF has a good strategy in terms of stability while looking for opportunity and has done well in its short life. As someone who has traded CEFs for many years I'm looking to HNDL as more of a longer term holding to provide cash flow. Not many great options these days.

Nice stuff. Thanks @msf for the comprehensive write-up. Particularly pertinent is the role of federal & state regulation which has undergone substantial changes over the years making comparisons of different periods difficult.
My understanding of some of the dynamics in play …
- Utilities tend to borrow a lot so that rising interest rates should diminish their profitability.
- Utilities appear to be substantially exposed to the energy sectors which one would expect should help during inflationary periods as energy prices rise (countering some of the damage from rising rates).
- Utilities own a lot of infrastructure which should appreciate in value during inflationary periods.
- While the utilities indexes may be confined to more traditional utility sectors, a fund may define utilities quite broadly. How broadly is anyone’s guess. However, 5g cellular, fiber-optic and satellite based connectivity are likely within some fund managers’ purview - making their investment products more responsive to technology advances than during the 70s and 80s.
- One wonders the extent to which the advent of self-driving vehicles may become intertwined with the utility sector, as these rely on constant internet connectivity.
- Utilities might also benefit from increasing use of EVs and the need for charging stations.
- The liability issue, which msf addresses, is a real wild card. We live in a much more litigious society than 50 years ago.

I wonder, @msf, if the success utilities had starting in the 70s might be related to the southward and southwestward movement of the US population. As you correctly point out, ignoring climate change and an unswerving faith that the Colorado river would flow forever now are shown to be false assumptions and the utilities will pay the piper. I recall being gifted a very few shares of Pinnacle West many moons ago. In my ignorance I sold them after a few years. Had I known how to set up a DRIP program, those shares would have grown a small nest egg for our kids or grandchildren. The donor of the shares simply sent a stock certificate with no instructions included, an odd gift from an uncommunicative father-in-law. His stock picking, buying a utility serving the four corners states just before their huge growth in population, is unassailable. Of course, there are other “if only” stories many of us can tell.

This name change would concern me if I held the fund (JNSTX).
The SEC says: "The Division takes the position that a 'short-term' ... bond fund should have a dollar-weighted average maturity of ... no more than 3 years."
https://www.sec.gov/divisions/investment/guidance/rule35d-1faq.htm
That doesn't apply to short duration funds. Floating rate securities are considered to have virtually zero duration, since their interest rate is generally set to match the market rate. That is, no interest rate sensitivity. But the securities themselves can have long maturities and may be illiquid.
If they have embedded options, like mortgages, they may have extension risk. To the extent that their rates don't adjust quickly or completely to market changes, they may have negative convexity - as rates go up (and bond prices fall), their prices may fall much faster than vanilla bonds with positive convexity.
What the prospectus says is that

The Fund expects to maintain an average-weighted effective maturity of three years or less under normal circumstances. ... "Effective" maturity differs from actual maturity, which may be longer. In calculating the “effective” maturity the portfolio managers will estimate the effect of expected principal payments and call provisions on securities held in the portfolio. ...[A]ll else being equal, [this] could result in more volatility than if the Fund calculated an actual maturity target.
...
Extension risk is the risk that borrowers may pay off their debt obligations more slowly in times of rising interest rates, which will lengthen the duration of the portfolio. Liquidity risk is the risk that fixed-income securities may be difficult or impossible to sell at the time that the portfolio managers would like or at the price the portfolio managers believe the security is currently worth.

https://connect.rightprospectus.com/janushenderson/TADF/47103E742/P?site=janushenderson

The ETF launched on Tuesday under SOC.
"SPC is a renter, not an owner," said CrossingBridge's Founder and Portfolio Manager, David Sherman. "In other words, we aim to capture the fixed income nature of pre-merger SPACs purchased at a discount-to-collateral value with a potential equity pop from shareholders reacting favorably to an announced deal. But we are not interested in being an equity investor post-business combination – that is a whole different ballgame."
According to CrossingBridge, SPACs offer very similar characteristics to fixed income securities, which include:
· SPACs have a liquidation date which is equivalent to a bond's maturity date.
· SPAC common stock shareholders have a full-redemption right upon a business combination, similar to a change-of-control put provision found in corporate debt indentures.
· SPACs are fully collateralized by U.S. government securities for the benefit of SPAC common stock shareholders to be released upon a redemption or liquidation. Hence, when an investor purchases SPAC common stock below its pro rata trust account value and holds the security to redemption or liquidation date, the investor will receive a positive yield, similar to a fixed income security's yield to maturity.
· SPACs may have equity upside by participating in an attractive business combination. This upside is similar to a convertible bond with the added feature that SPAC investors may redeem their common shares for their collateral value rather than continue ownership post-transaction.
SPACs are not a new asset class for Sherman; he made his first SPAC investment over 15 years ago. Given the increased popularity and capital flowing into SPACs, Sherman has significantly increased the firm's exposure to SPACs during the past few years. CrossingBridge believes the market is now large and liquid enough to effectively manage SPAC-dedicated strategies.
"Our guiding principle has been, and will continue to be, that return of capital is more important than return on capital," emphasized Sherman

Did you mean EGRNF ?
For every seller there’s a buyer. So, someone’s buying. The sharp decline alone wouldn’t deter me from investing a small percentage of assets in it if there were other compelling reasons to buy. IMHO buying and selling this one is best left to the professionals who might hedge the risk using derivatives.
Every market collapse needs a “whipping boy” whereon blame may be properly placed after the fact. Sometimes it’s unbridled speculators, sometimes unethical corporate insiders. There’s also illegal trading, over-reactive Fed tightening, lax governmental oversight, ad infinitum. Looks like EGRNF might have that ultimate fate. And what better place to disassociate ourselves from years of speculative excess than China?