Spinning Atom

“A problem with Monte Carlo tools that is exacerbated today is that they can often paint an unrealistic picture of returns. For example, an average expected return for cash of 2% is unrealistic (since the return on cash today is closer to 0%). This carries important implications for sequence risk for retirees, because the order you incur returns has a significant impact on the potential success of a given strategy.” - Wade Pfau, Ph.D.

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“We need to recognize that in planning our clients' future, we're dealing with ambiguity, not risk…The bottom line for investors today is being less concerned with the probability of success and more concerned with the consequences of failure. And the bottom line for brokers, reps and other financial advisors is finding ways to model portfolios realistically.” - Harold Evensky, CFP, AIF