Insights: 4% rule, election years, AI, charitable giving + the remarkable Ada Lovelace
Good reads:
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·???????? Weekly Investment Strategy
·???????? 4 Charts That Explain the Stock Market
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Best quote of the week:
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“I never am really satisfied that I understand anything; because, understand it well as I may, my comprehension can only be an infinitesimal fraction of all I want to understand about the many connections and relations which occur to me, how the matter in question was first thought of or arrived at, etc., etc.” – Ada Lovelace
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Best soundbites of the week:
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One of the most commonly asked questions I get is “how much can I spend in retirement without running out of money?”. The answer to that question is best answered by getting a comprehensive financial plan done (in part because everyone’s spending rate is unique in retirement, not to mention a whole host of other factors that are specific to an individual).
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Nonetheless, there is one frequently used rule of thumb that people will often refer to when trying to get a general idea of things.? It’s called the 4% rule and the basic premise is that you can make retirement funds last for 30 years by withdrawing 4% or less of the balance in the first year of retirement, then adjusting subsequent withdrawals for inflation.
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While I would still highly recommend a proper financial plan over a general rule of thumb when making retirement decisions, the following is good news for those who use it as a starting point for discussion:
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“After years of low interest rates, a new analysis from Morningstar suggests that retirees can now safely withdraw as much as 4% of their total retirement savings in their first year of retirement and have enough to continue withdrawing that same amount adjusted for inflation each year for the next 29 years.” – Morningstar via Bespoke Investment Group
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Many of my readers like fun statistics, especially when it pertains to politics. If that’s your cup of tea, then this one is for you.
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“Election Day 2024 is now less than a year away. In the year leading up to the last 20 U.S. Presidential Elections since 1944, the S&P 500 has posted gains 18 of 20 times for an average move of 9%. During these 12-month periods, the Consumer Discretionary sector has historically averaged the strongest gain (+12%), while the Materials sector has averaged the smallest gain at +1.4%.” – Bespoke Investment Group
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Best visuals of the week:
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If you feel as though you’re hearing an awful lot about Artificial Intelligence (AI) these days, you are. And if you’re feeling confused by some of the terminology around it, you aren’t alone. Below is a great chart that shows Google search trends for popular AI term such as Chat GPT.? Needless to say, it has skyrocketed over the last year or so!
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If you’re wondering how all of this came to be, here is a great synopsis on the birth of Generative AI, from my Raymond James analysts. Love it or hate it, you can’t argue that it’s interesting!
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“In June 2017, three Google engineers started a project that would eventually grow to a total of eight data scientists and a journal paper called, Attention is All You Need, which helped kickstart the current AI revolution. The paper introduced an architecture for processing language called a “transformer”, which would later be used to process everything from text, speech, music, images, and more. This single innovation helped start the development of large-language-models (LLMs), like OpenAI’s ChatGPT, that introduced the world to a new way of working with machines. Since November 2022, LLMs led by ChatGPT have captured the minds of the public, leading to what we now term the ‘generative AI’ revolution. Since its introduction, ChatGPT has experienced the fastest growing user base in history, reaching 100 million active users in only two months after its release. This trend has only increased in 2023, with many firms now attempting to catch up, or integrate solutions from generative AI and LLMs into their products and services. In short, ChatGPT was the proof-of-concept that the public did not expect was possible with computers.”
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In case you missed it:
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Great chat (as always!) with Jenna Dagenhart and Asset TV Canada. We talked about charitable giving, some of the potential positives for markets over the near-term, and some important year-end tax considerations for investors. Watch the full interview here:
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I’d love to hear from you:
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Do you have a question about the markets? Or perhaps you’d like to learn more about a particular financial planning topic? Maybe you’ve got a question about your own personal situation?
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Send me your question, and I’ll include it as a topic in an upcoming newsletter: [email protected].
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Beyond the markets:
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I thought I’d follow up last week’s story on the successes of Madame Clicquot with yet another impressive woman: Ada Lovelace.? She’s known for being the world’s first computer programmer, and not surprisingly, a brilliant mathematician.
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Here are some interesting facts about her:
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·???????? Born in 1815, she was the daughter of notorious Romantic poet George Gordon, Lord Byron.
·???????? Fearing Lovelace would follow in her father’s footsteps, Lady Byron immersed her in mathematics. From the age of 4, Lovelace was tutored in mathematics and science, an unusual course of study for a woman in 19th-century England.
·???????? Lovelace was commissioned to translate the transcript of a lecture given by Cambridge mathematics professor Charles Babbage about the Analytical Engine. She added her own notes to the lecture, which ended up being three times as long as the actual transcript. In it, she suggested the data input that would program Babbage’s Analytical Engine to calculate Bernoulli numbers, which is now considered the first computer program.
·???????? Lovelace was also a visionary: She understood that numbers could be used to represent more than just quantities, and a machine that could manipulate numbers could be made to manipulate any data represented by numbers. She predicted that machines like the Analytical Engine could be used to compose music, produce graphics, and be useful to science. Of course, all that came true—100 years later.
·???????? Alas, we can’t all be perfect: Lovelace had a gambling habit that contributed to her dwindling finances and forced her to secretly pawn the Lovelace family’s diamonds. She reportedly once lost ￡3,200 betting on the wrong horse at the Epsom Derby and she was supposedly working on a program designed to predict horse-race results.
·???????? She was also known as “the enchantress of numbers.”
·???????? Lovelace died of cancer in 1852, when she was just 36 years old.
·???????? Lovelace’s ideas about computing were so far ahead of their time that it took nearly a century for technology to catch up. As the field of computer science dawned in the 1950s, Lovelace gained a new following in the digital age when her notes on Babbage’s analytical engine were republished in B.V. Bowden’s 1953 book “Faster Than Thought: A Symposium on Digital Computing Machines.”
·???????? A computer programming language developed by the U.S. Department of Defense is named in Lovelace’s honor and is still in use today.
·???????? Ada Lovelace Day (the second Tuesday of every October) is an annual day set aside for learning about and supporting women in science, technology, engineering, and mathematics.
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Source: History, Mental Floss
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Thanks for reading, and I wish everyone a great weekend!?
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Cheers,
Kim
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Kim Inglis, BCom, CIM, PFP, FCSI, RIAC
Portfolio Manager
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T: 416.777.6417 (Toronto)
T: 604.654.1160 (Vancouver)
T: 250.979.1803 (Kelowna)
TF: 1.877.363.1024
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