Sequence of returns risk

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Joined: Sun Mar 20, 2016 4:10 pm

Sequence of returns risk

Post by caymann »

How do i model "sequence of returns risk" in this calculator?

Posts: 585
Joined: Thu Feb 28, 2008 6:48 pm

Re: Sequence of returns risk

Post by jimr »

Sequence of returns risk is modeled by default in the planner's Monte Carlo simulation logic.

You can manually increase the sequence of returns risk but increasing the standard deviation (use custom investing style).

A great way to see sequence of returns risk visually is to use the sensitivity analysis feature. After you get your plan set up and have done a few runs, click the sensitivity analysis button on the main window. Then set sensitivity parameter 1 to portfolio return and set sensitivity parameter 2 to standard deviation. then click run sensitivity analysis. The graph will show how the success rate of your plan varies with changes in the portfolio return and standard deviation.

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