Endnotes

1. The price at which investors buy or sell common stock and bonds in the market relative to a fundamental indicator. Typical measures include price/earnings ratios, Q ratio, price/dividend ratio, price/sales ratio and more. A high market valuation indicates a high price relative to underlying business fundamentals and a low valuation indicate a low price relative to underlying business fundamentals. ♠

2. The highest withdrawal rate, expressed as a percentage of the account balance on the first day of retirement, and adjusted for inflation annually, that allows for a lifetime of withdrawals without running out of money before you run out of life. ♠

3. A simple rule of thumb used to approximate an amount that can safely be withdrawn from your retirement account each year. It is calculated by multiplying your total retirement savings on the first day of retirement by 4% and then adjusting that amount annually for inflation. ♠

4. Past periods of data limited in duration and excerpted from a larger data sample then arranged in sequential order. For example, if you have 100 years of stock price data beginning in 1910 then 30 year rolling historical periods would be 1910–1939, 1911–1940, 1912–1941, 1913–1942 and so on. ♠

5. A strategy of apportioning an investment portfolio between various asset classes (e.g. stocks, bonds, cash) that attempts to match risk and reward to the investor’s goals and risk tolerance. ♠

6. A set-it-and-forget-it approach to asset allocation based on the belief that return differentials between asset classes cannot be forecast or there is a constant risk premium between stocks, bonds, and cash implying sufficient market efficiency that no competitive advantage can be gained through dynamically allocating a portfolio or varying asset allocation. ♠

7. Conventional assets are investment products found in a standard portfolio including stocks, bonds, mutual funds, and treasury securities. Alternative assets are non-traditional investment products including hedge funds, precious metals, rare stamps, rare coins, real estate, antiques, and collectibles. ♠

8. Attempts to define a range within which the desired answer is estimated to lie and indicates how precise that measurement is. It is used when single point estimates are not sufficiently reliable for decision making. It measures the probability that a value will fall between an upper or lower boundary. For example, a 95% confidence interval means that 95 times out of 100 the result should be within the upper and lower boundary of the range with it falling outside the range 5 times. ♠