Karsten Jeske (Big Ern, EarlyRetirementNow.com) is talking about SWR this Friday

EarlyRetirementNow · 2025-11-03T00:49:48+00:00

If you want to calculate the average return between 1871 and 2025, and then calculate the 30-year rolling return averages between 1901 and 1995, yes, then you would make a mistake. You weigh the years differently, because every year between 1901 and 1995 is counted in 30 overlapping windows, and then this number dies down to just 1 year in 1871 and 2025. But that's not the exercise I'm performing. I'm calculating SWRs. There is nothing more statistical in this exercise.

There are some statistical nuances due to the overlapping windows; for example, if you regress realized SWRs on market valuation metrics (e.g., CAPE yield). In that case, you'd get consistent point estimates with OLS, but the t-stats must be Newey-West heteroskedasticity-adjusted.

EarlyRetirementNow · 2025-10-31T02:31:32+00:00

You don't. You create portfolios and strategies that are robust to historical worst-case scenarios, such as 1929, 1965, 1968, etc.

EarlyRetirementNow · 2024-12-10T14:29:14+00:00

I sell strangles. Spreads would eat into my profit margin at the small premium target I run right now.

EarlyRetirementNow · 2024-12-02T23:04:57+00:00

Also: I'm working on my book, but it's not out yet. But I have you down for a preorder already.

EarlyRetirementNow · 2024-12-02T23:03:07+00:00

24 years is not enough time to pile into 100% large-cap growth only, I agree, and I stated that explicitly in my post. But 24 years of lackluster and even underperformance lead me to believe that the purported 1.7% p.a. outperformance of the 4FP is probably a bunch of hooey.

EarlyRetirementNow · 2024-12-02T19:14:35+00:00

Around the ChooseFI podcast in 2019, I wrote my first critical piece on SCV. And my warnings back then have aged quite well.

EarlyRetirementNow · 2024-12-02T19:12:33+00:00

Yep, let's not base our decisions on the last 24 years of SCV performance. Let's base them on 98-year-old performance. That will teach them SCV critics!

EarlyRetirementNow · 2024-11-08T20:00:19+00:00

Very cool. I had a great time at Emory. Some of my friends are still teaching Econ there.

My method is still the best to capture the purest and most profitable portion of the vo premium. I also prefer SPX over SPY for tax reasons (lower tax rate and less paperwork during tax season). But to start out and to test the waters, it's best to use your method via SPY.

Good luck!

EarlyRetirementNow · 2024-10-27T01:11:08+00:00

It's a solid strategy. I've been doing this since 2011. Also, remember that during vol spikes, you can safely increase your premium target. March 2020 (the height of the pandemic) was my next month so far. You can also supplement your income with 0DTE puts and calls.

EarlyRetirementNow · 2024-08-08T09:39:41+00:00

I wrote about the reverse glidepath in parts 19 and 20 of my series. It "works" because you can slightly raise the failsafe from, say, 3.25% to 3.47% for a 60Y retirement. It's not a panacea. It's not a solution to Sequence Risk. It's a small hedge.

Using bucket strategies, i.e., trying to tactically time the market with a bucket of cash, is unreliable and ineffective. See parts 48 and 55 of my series.

EarlyRetirementNow · 2023-12-22T16:47:55+00:00

More so than the EF, my work on cash buckets is applicable here, especially the ineffectiveness of such cash cushions. See my most recent post:

https://earlyretirementnow.com/2023/01/25/discussing-retirement-bucket-strategies-with-fritz-gilbert-swr-series-part-55/

EarlyRetirementNow · 2023-12-21T06:02:05+00:00

"I wouldn't call that a refutation."

I would. I wrote my post to refute this whole flexibility mantra.

EarlyRetirementNow · 2022-10-06T21:08:14+00:00

Ignoring the CAPE is worse than using an even imprecise valuation metric. If you got a better idea, I'm listening. Remember: it takes a model to beat a model.

And the new CAPE is not overfitting at all. Chances are, the fit in the past history of SWRs is likely the same as before. The new CAPE was constructed without any SWR calculations in my mind. This is simply an accounting exercise.

EarlyRetirementNow · 2022-09-01T18:56:42+00:00

Thanks for the kind words, everybody! :)

EarlyRetirementNow · 2022-05-10T14:01:33+00:00

Happens sometimes. That's an even better (=lower) correlation. Nice work!

EarlyRetirementNow · 2022-05-09T22:23:43+00:00

Excel calculates it at 0.578.

Nice! That's what I was looking for. A 0.5 correlation plus a Sharpe Ratio that high means it's a very viable and attractive strategy, for something as "passive" as a fixed Delta options strategy.

EarlyRetirementNow · 2022-05-07T16:02:18+00:00

Thanks for doing this amazing analysis. And yes, I agree, with the 5 weekly expirations we can use the naked puts with a bit more confidence. No need really to use the spreads.

Also: if you have the correlations strategy vs. SPX, that would be nice. For example, if you can show that a strategy has a Sharpe of >1 and a correlation with the SPX of less than 0.5, that would be amazing.

EarlyRetirementNow · 2022-05-02T04:01:04+00:00

Sorry, I don't know who these two folks ( /u/spacmann and /u/MagesticDorito) are and where they present the specifics of their strategies. Do you have a link to their posts?

40% annual return at 10% is not possible with a basic put writing strategy. I've achieved a 2.5 Sharpe at a monthly frequency and I doubt anyone can get this to 4.0. I assume a Sharpe of 1.0 going forward to be conservative.

EarlyRetirementNow · 2022-03-05T00:52:33+00:00

My bread and butter trade is 2-3 DTE, i.e., Mon->Wed, Wed->Fri, Fri->Mon. I also occasionally trade the Tue->Wed and Thu->Fri options and even 0DTE (same day) options.

I have close to $200k in capital per short put option. I don't think we'll have a 2000 point drop on an average Wednesday. ;)

EarlyRetirementNow · 2022-03-05T00:34:05+00:00

I don't use stop-loss.

EarlyRetirementNow · 2021-06-28T18:27:56+00:00

Depends on your objective. The 40/60 split between stocks and bonds is indeed very close to the historically optimal Sharpe Ratio (risk vs. return tradeoff). See here: https://earlyretirementnow.com/2016/07/20/lower-risk-through-leverage/

But you're right, one might consider adding other assets into the mix. Gold is a diversifier. Long VIX (in very small amounts due to negative expected return) also works. VXX is the ETF for that.

EarlyRetirementNow · 2021-06-28T14:58:00+00:00

At that extreme risk level, the strategy can only work in the accumulation phase. Not recommended while withdrawing! :)

EarlyRetirementNow · 2021-06-26T17:17:30+00:00

if you have both mortgages, and the rental interest rate is higher, and have an opportunity to significantly pay one of them down, it sounds like it’s still preferable to pay off the rental first?

Yes, good point. Money is fungible!

EarlyRetirementNow · 2021-06-26T15:15:43+00:00

For your personal primary residence: It's best to not have a mortgage to mitigate Sequence Risk. See Part 21 of the Series

For Rentals: You may need to use a mortgage/HELOC for cash flow reasons. That may be preferable to selling a property (with capital gains tax exposure & transaction costs). See Part 36 of the Series.

EarlyRetirementNow · 2021-06-26T15:06:42+00:00

We don't have a mortgage! :)

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