Dr. Craig Israelsen concedes the 6.63% annualized return net of expenses of his 7Twelve Portfolio methodology for the 15-year period through the end of 2015 isn't exactly gangbusters.
Israelsen, who teaches monthly on A4A, knows that, statistically, at any given moment in time, 7Twelve may not look like the brilliant strategy it is. Only if you know that rolling 15-year periods can be funny like that would you know that Craig Israelsen, a Ph.D. and economics professor for two decades, is probably right when he says the 6.63% of the 15 years ended December 31, 2015 is on the low side of what to expect from 7Twelve over most monthly rollng 15-year periods.
And did you hear Israelsen say that, in some rolling 15-year periods, he expects 7Twelve's low-cost diversified portfolio to generate calendar-year returns of 9% or more?
Another gem in this presentation is a table showing performance results of rebalancing monthly, quarterly, and annually over the last 15 years. Annual rebalancing is just fine. Here's the evidence.
Making a lot of little decisions like how often to rebalance how to gauge 15-year returns is what separates an investment professional from a hack, and Israelsen offers one lesson after another like that in this 75-minute session, as he has done month after month on A4A. He's already working on a presentation for next month looking at rolling 15-year returns.
Fifteen-year returns are pretty important. Few people plan to live less than 15 years. If you're 60, you have to believe you'll last another 15 years. Even when you're 80, if nothing is wrong with you medically, you probably want to plan on living 15 years. Five- and 10-year periods in investment histpry can be pretty volatile. Planning to live 15-years gives you a smoother, more predictable ride. For planners, it helps lower your margin of error. It cushions the effects early losses can have on a retirement portfolio or the damage it a few years of losses can do at the end of life.
Statistics for this class from Craig are again amazing — a 4.8-star rating! Read the comments from attendees of the live session, which are always appreciated.