Make More Optimal Tradeoffs Between Investment Risk and Return
VeriPlan helps you make more optimal decisions about the tradeoffs between investment risk, investment return, and personal savings
Too often decisions about risk-adjusted investing and asset allocation are over-simplified with a few questions about your risk tolerance. Typically, this superficial process will be followed quickly by the offer of a canned, off-the-shelf asset allocation scheme and the attempted sale of costly investments to fill in the blanks of the proposed asset allocation.
In this process, people have no idea whether their investment strategy combined with their savings rate, might lead to the future that they desire. Furthermore, most people do not fully appreciate the tradeoffs between investment returns, investment risk, and personal savings rates that are implicit in any proposed asset allocation. When someone asks you a few questions about risk and labels you a “conservative,” “average,” or “aggressive” investor, you have no real idea about what the proposed investment plan may require you to endure over your lifetime.
In contrast, VeriPlan puts you in the driver’s seat by providing full control over assumptions about your income, expenses, debt, investment returns, and return variations or risk. VeriPlan provides five user adjustable asset allocation methods for you to experiment with, so that you can better understand the tradeoffs between different investment risk and return strategies. VeriPlan helps you to understand what it really means to be conservative or aggressive and how different asset allocations could affect necessary rates of savings and the variability of outcomes.
By allowing you to analyze these tradeoffs on your own PC, VeriPlan can save you a great deal of money in different ways. If you decide to take less investment risk, VeriPlan helps you to understand the required savings rate that would still meet your long-term goals. To the contrary, if you choose to take on greater investment risk, VeriPlan can help you to evaluate whether your current savings rate is higher than necessary and whether you could spend more money for current consumption. (See: VeriPlan helps you understand how your current savings rate affects your future financial goals)
Tags: asset allocation
Personal Financial Planning
- American Funds – Income Fund of America – Class A Shares (AMECX) rate a +2 Fund Authority Score (Fund Authority Scores rate mutual funds and exchange traded funds (ETFs) on the most important economic factors that influence individual investors' net long term diversified investment fund performance. The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise and objective summaries of mutual funds and ETFs for comparisons within investment [...])
- American Balanced Fund – Class A Mutual Fund Shares (ABALX) collect a +1 Fund Authority Score (The table below in this article presents The Skilled Investor's Fund Authority Score and other information for the American Balanced Fund - Class A Shares.
The diversified investment fund strategy of the American Balanced Fund - Class A mutual fund shares
According to its prospectus filing on the U.S. Securities and Exchange Commission EDGAR system, the investment [...])
- Earned Income Drives the Personal Finances of Most People (Do-It-Yourself Financial Planning - Earned income drives the personal finances of most people
The ability to project your various income sources automatically over your lifetime is one of the first steps in creating a useful do-it-yourself personal financial plan. Whether from wages and salary or from self-employment, personal earned income drives the lifetime finances of most [...])
- Commentary on How Many Mutual Funds are Needed for a Well-Diversified Portfolio (
For holding periods of many years, diversification improves dramatically, when you hold multiple actively-managed mutual funds in an investment portfolio.
In "How Many Mutual Funds Constitute a Diversified Mutual Fund Portfolio?," Professor Edward O'Neal of the University of New Hampshire at Durham tackled the important question of how much an investor could improve on diversification by [...])
- Hitting the Citibank Stone Wall in Polite Conversation (PIRATES OF THE CREDIT SEA - Part 4: Hitting the Citibank Stone Wall in Polite Conversation
This article continues my personal saga of trying to get Citibank to fix problems with their management of my credit card account with them.
For a summary of the overall situation, go to Part #1: My Treasure Is Taken!
For an article [...])
- Be Wary of New Investment Asset Classes (
Hear ye, Hear Ye, individual investors: Be wary of new investment asset classes - A Tip from The Skilled Investor
Many promoters in the financial services industry have shown a strong proclivity in recent years to invent and to market supposedly "new" investment asset classes. Industry advocates will claim that these new asset classes deserve some [...])
- The Quality and Cost of Advice Paid by Investment Sales Loads (Can you really get free and objective investment advice, when you pay investment sales loads?
Excessive investment expenses are one of the most significant barriers to your family's lifelong financial security.
Excessive investment costs are a plague on your personal financial planning. While financial services industry sales people tell you that you need to pay more to [...])
- 10 Lower Cost S and P 500 Index Mutual Funds (10 Lower Cost S&P 500 Index Mutual Funds
Regular readers know that The Skilled Investor advocates a very boring, low cost, broad market, passive index investment strategy. Costs less. Gets the broad market return -- whatever that will be. Narrows the range of outcomes and therefore the risk to your long-term personal financial plan. Takes far [...])
- Roth IRA Contributions Versus Traditional IRA Contributions for Renters (Introduction: Roth IRA Contributions versus Traditional IRA Contributions for Renters
In a series of articles, The Skilled Investor compares different lifetime financial planning projections for Fran and Fred Frugal to illustrate the relative value of adopting different financial planning strategies. Fran and Fred, both ages 30, are a married working couple with $100,000 in combined annual [...])
- Fund Authority Scores for Stock ETFs and Mutual Funds – Historical investment performance (
Fund Authority Scores rate stock mutual funds and ETFs on the most important economic factors affecting long term diversified equity investment fund performance. This article explains how historical fund performance is calculated.
<<-- Go to Part 1
Go to Part 3 -->>
Part 1 of this article discussed direct and hidden investment costs, the most heavily weighted factors [...])
- Understand Your Lifetime Personal Savings Requirements (VeriPlan helps you to understand your lifetime personal savings requirements and whether your current savings rate is sufficient
How much you earn, spend, and save are by far the most dominant determinants of your long-term financial well-being.
You need a means to evaluate your current sustainable lifecycle consumption rate. VeriPlan provides such a means. VeriPlan projects your [...])
- The Fund Authority Score – A Better Mutual Fund and ETF Rating System (Fund Authority Scores rate mutual funds and ETFs on the most important economic factors influencing long term diversified investment fund performance
The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise and objective mutual fund and ETF comparisons within investment asset classes.
Fund Authority Scores measure investment fund cost, maturity, efficiency, and [...])
- Your Valuable Assets Are Simply Your Evolving Estate (
Your investment portfolio and other property assets are simply your evolving estate
A previous financial article, “The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that investors are much better off with a well-considered financial plan. A stable set of financial beliefs can [...])
- Passive Index Investment Strategies are Superior (Passive index investment strategies are superior, because they narrow the range of outcomes and lower your investment risk
A previous article, “The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that individuals are much better off with a well-considered financial viewpoint. A stable [...])
- Two Examples of the Tax Assets Graphic in VeriPlan (Two examples of the Tax Assets graphic in VeriPlan
TAX ASSETS: Taxable and Tax-Advantaged Financial Assets (real $/yr)
Below are two examples of the blue-tabbed TAX ASSETS graphic, which come from VeriPlan's "Sue and Sam Saver" tutorial. This graphic separates their cash, bond, and stock assets by account taxability throughout their lifetime projections. Assets are separated [...])
Comments are closed.