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A modest request

Larry,

I spent the last year using MoneyGuidePro software while interning at a CFP firm. ESP is far superior but difficult to understand in some cases.
The Monte reports are an example.

Would you please consider uploading a short paper to the website in which you run and interpret/explain all the monte outputs?

You recent Consumer Reports paper "Rethinking your investment risk" gave me some insight into how to use monte, but I'm still far from comfortable with it.

Rather than expand their manual the MoneyGuidePro firm has uploaded a series of papers describing various functionality in greater detail. Perhaps you could do the same here.

ESP is a great product. But to fully utilize it one has to first understand it.

Charlie

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djr

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Hi Carlie,

This is a good idea. I'll do this in the new year after we revamp how we are doing the Monte Carlo.

Right now the way to understand what we are doing on the Monte Carlo is to think about running ESP Basic every year. In doing so you'd be entering your current asset values (both regular assets and retirement account assets). These future values would differ from what running ESP Basic this year says they'll be in the future (unless you've invested in perfectly safe bonds, i.e., Inflation Indexed Bonds).

Otherwise, the returns you'll receive will almost surely differ from the average (expected or mean) return ESP Basic assumes you'll earn. Hence, each year when you run ESP Basic you'll be entering asset values that are different from the current forecast of those asset values you see when you run ESP Basic this year now and look at forecasted future values of regular asset and retirement account asset in their respective reports.

And in each future year when you run ESP Basic you'll see living standard recommendations for that year that differ for that year from those projected in this year's run (again, because the asset returns will vary).

In running the 500 trajectories, we are simulating your having not 1 future, but 500 different futures with different asset return outcomes, and in each of these 500 futures, we assume you run ESP Basic each year. The variation at different ages in your living standard across these 500 trajectories (500 futures) is what we are showing in the percentile distribution of living standard.

Hope this helps. If not, call me at 617 834-2148.

best, Larry