Had to look it up!
https://www.businessinsider.com/the-tal ... ?r=US&IR=T
"Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve"
"In his modern update on Talmudic investing philosophy, Gibson defines “land” as real estate investments, mainly REITs (he doesn’t consider a home an investment asset); “business” as U.S. stocks; and “reserve” as U.S. bonds. …"
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The Simple Path to Wealth
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Re: The Simple Path to Wealth
Itsallaguess wrote:bluedonkey wrote:
Talmud Investing - will we now start to see another acronym for an investing style (TI), alongside TR, LTBH, HYP, etc?
We'll need a new board, of course...
Talmud Investing Theory - Practical
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NOOOOOOOOOOOOOOOOO!!!
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Re: The Simple Path to Wealth
monabri wrote:Had to look it up!
https://www.businessinsider.com/the-tal ... ?r=US&IR=T
"Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve"
"In his modern update on Talmudic investing philosophy, Gibson defines “land” as real estate investments, mainly REITs (he doesn’t consider a home an investment asset); “business” as U.S. stocks; and “reserve” as U.S. bonds. …"
REIT's nor U.S. Bonds existed back when the third each land/business/reserves was being advocated millennia ago.
One should always divide his wealth into three parts: a third in land, a third in merchandise, and keeping a third ready to hand. : Bava Metzia. 42a
Physical land, physical in-hand reserves (hard currency/gold). But for some periods of time such as up to 1932, money and gold were pegged (at a rate set by Issac Newton, the then Master of the Mint (Chancellor of the Exchequer)). For the years when money and gold were pegged it made more sense to hold Treasury Bills (short duration Gilts), as in effect that had you in the position of the state paying you (interest) for it to safely store your gold. The BoE ended that in 1931 when too much Treasury bills were being sold and demanded in physical gold payment and where the gold was being taken out of the UK.
1932 to late 1960's/early 1970's and reserves were better considered as being silver as that was free floating (market price driven) rather than still being pegged (by the US). Gold only became free floating since the late 1960's/early 1970's when President Nixon used the decoupling as a means to help pay down the cost of the Vietnam war.
I differ from Gibson in interpretation, instead preferring : 1. home (or farm/land/woodland), 2. stocks (or perhaps your own business), 3. pre 1932 = government short dated treasury bills, 1932 to 1971 silver, since 1972 = gold.
A variation is to hold US stock for the currency diversification benefit (£ UK home, US$ stock, global currency (gold), diversified across land, stocks, commodities). Also during world war years, the more you can migrate into physical precious metals the better (given the uncertainties).
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Re: The Simple Path to Wealth
1nvest wrote:But for some periods of time such as up to 1932, money and gold were pegged (at a rate set by Issac Newton, the then Master of the Mint (Chancellor of the Exchequer)).
Not “the then” surely!
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Re: The Simple Path to Wealth
1nvest wrote:GeoffF100 wrote:Even if there is a 30 year 4% annualised real gain, that does not mean that you would not go bust somewhere along the way if you always draw an index linked 4% from your portfolio. If you retire at 50 as I did, you may need to draw an income for 50 years, or possibly even more. Yes, you are most likely to go bust in very difficult times. Unfortunately, we can be sure that there will be difficult times ahead. That makes it more difficult, not easier.
I follow a Talmud type asset allocation, third each in land (home), stocks and gold. Retired in my mid 40's, now nearly 60. I've evolved into that Talmud choice over time, only been using it for the last decade or so.
SWR for me provides a steady inflation adjusted income, paid no matter what (taken out of total returns, whether up or down, unlike 'spending dividends' that can have high variability). If started today with a 0.2%/month SWR (2.4%/yearly) for all historic 50 year cases over the last 200 years that has sustained the original inflation adjusted start date capital value in the worst case, more often (median average) doubled up or more the capital value. i.e. had a high rate of being a perpetual withdrawal rate. Yes that 0.2%/month is only 2.4%/year so a relatively low SWR (greater potential of success). But that excluded imputed rent benefit i.e. is measured against house price only value, and where the 'inflation rate' was revised to include house price inflation (third house price increases, two thirds broad consumer price increases). Factor in that historic imputed rent benefit, the rent you'd otherwise have to find/pay if you were renting instead of owning, and that was 4.2% average, so 1.4% when proportioned to being a third of assets. Which combined with the 2.4% SWR = 3.8%. So in some respects I am drawing a near 4% SWR, and based on history that has a high probability of success. Nor do I see the prospect for that being poor/lower in forward time.
As rebalancing back towards around a third each in home/stock/gold is awkward with respect to the home value element, we use UK stock as a more liquid proxy for 'home' value (so 'home' = actual properties and UK stock, but predominately actual home values). For currency diversification UK home (£), US stock ($/primary reserve currency), global currency (gold). Asset diversity of land (home), stocks and commodity (gold). A reasonably balanced asset allocation. Yes each of the assets are volatile, but when it comes to drawing the monthly SWR often one is up more than the others (or down less), and taking from that helps towards rebalancing the assets back towards more equal weightings; And often is a form of taking profits off the table, and where those short term fast gains might later mean revert (disappear) such that it was better to have taken money off the table at that time.
Personally in that context I opine that 4% still has a good forward time prospect of success, but of course subject to choice of asset allocation/assets. A far better prospect of success over the next 30 years (or even 20 years) compared to my prospect of being around to see whether that was the case or not. I now have the added benefit/risk reduction that I'll be receiving a occupational pension soon, so much of past portfolio income will transition from being relied upon over to being more for luxuries/(adult) children. Even more so if/when I additionally receive the state pension on top of that (age 67/68). I suspect the combined pensions alone could provide sufficient income for needs, such that personal financial risk is very low.
For another with no occupational pension, that was renting instead of owning their own home, that was all-in on stock (such as HYP) and ignoring capital value/relying upon dividends to cover paying their rent and providing disposable income - for me that would be (very) high risk and far more inclined to lead to failure (too little in dividends at a time when share prices were low - double whammy type hit).
I am in a different ball game. The market value of my house is less than 10% of the market value of my other investments. I could put a lot in REITs, but why overweight one sector? REITs are highly correlated with the stock market as a whole anyway. For tax reasons, I use my ISA and SIPP to hold equities. Cash is going into bonds guaranteed by the FSCS. Income is not an issue for me. My defined benefit pensions more than cover that.
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Re: The Simple Path to Wealth
bluedonkey wrote:Itsallaguess wrote:bluedonkey wrote:
Talmud Investing - will we now start to see another acronym for an investing style (TI), alongside TR, LTBH, HYP, etc?
We'll need a new board, of course...
Talmud Investing Theory - Practical
Cheers,
Itsallaguess
NOOOOOOOOOOOOOOOOO!!!
Indeed no: we need a Talmud Practical Board, and a Talmud General Strategy board
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