One of the most rewarding parts of our work at GWS is when we hear clients tell us that we have provided them with greater confidence. They feel better about addressing their family’s needs if something should happen to them. They have confidence toward pursuing their goal of retiring when they want. And they know their legacy and philanthropic goals will be addressed.
To help clients understand their “probability of success” with a given financial situation and plan, our advisors run what is called a “Monte Carlo Analysis.” This analysis considers a complicated algorithm based on various nuanced factors, mainly varying rates of return and inflation. Then, within seconds, it computes 1,000 different scenarios based on those factors. The result is a percentage — the probability of success — which we then use to identify whether the client is on track or if we need to tweak certain aspects of their plan.
In this video, I unpack exactly what a Monte Carlo analysis is and how we use it to form a client’s Goals Analysis (or a financial plan). Take a look! And don’t hesitate to reach out to your advisor with any questions.
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Disclosures:
Economic forecasts may not develop as predicted, and there can be no guarantee that strategies promoted will be successful. Therefore, the opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All performance references are historical and are no guarantee of future results.
Securities and advisory services are offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. All investing involves risk, including possible loss of principal. No strategy assures success or protects against loss.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF’s net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.