I'd like to know how a 8% withdrawal rate is "sustainable". I'd like to see Monte-Carlo simulation results if you have them because you are making a truly astonishing claim here.
Forget Monte-Carlo simulations !
Let's talk real money !
My favourite investment is Real Estate Investment Trusts (REIT's). However, of the approx 30 REIT's that trade on the TSX, 23 of them fail my extremely strick investment criteria, and I only buy from the remaining 7 quality REIT's.
Riocan, Canada's largest REIT, with major tenants such as Walmart, Tim Horton's, TD Bank, etc is one of my 7 quality REIT's.
Back in 2002, I first purchased Riocan units at $13, which were paying approx $1/unit in distributions, ie approx 8% yield. By 2007, Riocan units hit a high of approx $27/unit, and realizing that they were over-priced, my clients and I simply held our Riocan units and put new money into cash.
Recently, during Feb/09, I increased my Riocan position buying more at $12.15/unit, which based on their current $1.38 annual distribution equals a 11.4% cash (sustainable) yield.
Like my hero Warren Buffett, I am not perfect and have made many mistakes along my investing way. Looking back now, I regret not selling Riocan during 2007 at $27.
However, if you go back to my 2002 $13 Riocan purchase, the last 7 years, even though there has been very little price appreciation, my sustainable cash rate of return, just based on the annual distribution has been over 8%, during the worst 7 years since the 1930's.
Should I mention that some of my recent Feb/09 Riocan $12.15 purchase was funded by a 5.5% margin loan, thereby increasing my actual cash return on equity from 11.4% to almost 20 % ? What will be my final return on all of this when Riocan goes back to $27 in 3 - 5 years from now ?
I'm astonished that you're astonished with a 8% sustainable return !
Better investment research does exist.
Bob Novoselac B.Admin., C.A.