Save Your Planning from the "Flaw of Averages".

Rather than calculate the future value by using the same fixed percent rate of return for every year (usually an assumed 'average'), our Monte Carlo program grabs a different percentage rate at random from a pre-defined range of possible returns, calculates the growth period 1,000 or 10,000 times (depending on the program used) and lays out the results. This type of statistical report is used to project possible FUTURE values of an investment. It is the preferred alternative to assuming a fixed rate of return in growth calculations.

Monte Carlo projections work exceptionally well with the more analytical client, but can also help the average client grasp the concept of FIA as a long-term growth (or growth & income) investment and present realistic expectations of credit method performance.

Our Monte Carlo simulations can also project the effect that taking out an income stream can have on the growth of an investment. These are known as Monte Carlo Retirement scenarios.

Sample Monte Carlo Retirement report (PDF)

Who else uses Monte Carlo simulations?

Although Monte Carlo simulations were developed by the U.S. Government in the 1940's as a part of the Manhattan Project nuclear program, major corporations now use Monte Carlo to help determine inventory needs, predict sales trends, and optimize their own stock hedging strategies. They may refer to it as "stochastic modeling".

Learn more about the "giants of finance" and the creators of Monte Carlo, here

Nobel Prize winner William Sharpe, one of the founders of Modern Portfolio Theory, uses Monte Carlo simulations in his retirement planning tools for the advice firm, Financial Engines. Investment Advisors and Financial Planners have been using Monte Carlo for years: the NASD recognized this and approved the use of Monte Carlo with clients in February of 2005.

Learn more about an alternative analysis method, Historical Hypotheticals, here

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