Beware of Survivorship Bias When Investing

Beware of Survivorship Bias When Investing

Why long-term U.S. stock market outperformance could be because it has avoided major catastrophes. Does an over-reliance on historical U.S. stock returns when modeling retirement outcomes lead to spending rates that are too high?

Topics covered include:

  • Why you might consider earthquake insurance
  • What is survivorship bias and what are some examples
  • Why the U.S. is an outlier when it comes to stock market performance
  • Why the 4% retirement spending rule might be too high
  • If the 4% spending rule is too high, what can retirees do instead to have enough for retirement
  • Why the size and scale of the U.S. economy provide some resistance to catastrophes


For more information on this episode click here.

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Show Notes

Homefacts

Survivorship Bias—Matt Rickard

Is The United States A Lucky Survivor: A Hierarchical Bayesian Approach by Jules H. van Binsbergen, Et al.—SSRN

The Financial History of Emerging Markets: New Indices by Bryan Taylor—SSRN

The (Time-Varying) Importance of Disaster Risk by Ivo Welch—Financial Analyst Journal

The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets by Aizhan Anarkulova, Et al.—SSRN

The 2.7% Rule for Retirement Spending by Ben Felix—YouTube

Trends in Retirement and Retirement Income Choices by Tiaa Participants: 2000–2018 by Jeffrey R. Brown, Et al.—SSRN

Related Episodes

250: Investing Rule One: Avoid Ruin

326: The New Math of Retirement Spending and Investing


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