Page 4: Summary Outcomes

This page of the QPP Contents Guide goes over Page 4 of the Portfolio Report, the main body of QPP. This guide will describe what the inputs and outputs mean. Also, default settings, if any, are given. Furthermore, links to articles illustrating the specific features will be given.

NOTE: Quantext is not a registered investment advisor.  No information in this document should be taken as advice to buy or sell any asset.  Any and all information obtained from Quantext is on an "AS IS" basis. Please note that the numbers/tickers used in the QPP screen shots and examples are for illustrative purposes only and are not to be taken in any way as advice.
Figure 4a: This page 4 of QPP.

Pie Chart Showing Allocations.

Probability of Running Out of Money: Though this is a small box on the screen, it is a very powerful chart in that it is showing the distribution of possible outcomes for one's future based on all of the given input and the Monte Carlo simulator’s calculations. 

To aid with the understanding of this output, here is some discussion of the example in the screen shots: Note that the age at retirement is shown directly above this chart. (This is adjustable on page 1 of QPP, not on page 4.) In the example, the age at retirement is 64. The chart shows us that in 10 out of 100 possible outcomes, statistically, the portfolio runs out of money by the time the person is 104 years old. In 25 out of 100 possible future outcomes, the person runs out of money by age 129. Notice that the age 129 is repeated throughout the rest of the chart. This does not mean that there is not a statistical distribution beyond this age; it merely reveals that QPP has a maximum age at which it just fills the chart.

In continuation of this example, let’s go back to page 1 of QPP and change the current portfolio value from $1.4 million to $1.0 million. (Our example situation still entails a 64 year old at his/her year of retirement.)


Figure 4b: This chart shows the revised outcomes on page 4 of QPP.

Now the Probability of Running Out of Money chart shows a more pronounced statistical distribution. In 10 out of 100 possible outcomes (“the 10th percentile”) this person will run out of money by age 85 according to QPP. In half of the possible projected scenarios, the 50th percentile, this person has no money left by age 114. Here is where one must assess their longevity risk tolerance. If you have many relatives that have lived past the age of 91, is it tolerable to have a 25% chance of being broke at that age? Is a 10% chance of having no money at age 85 reasonable? Though these are not easy questions to answer (and Quantext does not even attempt to do that) a reasonable glimpse into the future has been laid out. Further manipulations of Retirement Date, Income in Retirement, etc. will demonstrate the sensitivity of these factors.

All of the quantities on page 1, if adjusted, will immediately be reflected in this chart. Similarly, the allocations on page 3 of QPP can be changed and the results will be immediately reflected in this chart. (There is no need to hit GET DATA again.) Of course, if you alter the tickers on page 2 of QPP –or the historical period – you must hit GET DATA before the rest of the program will reflect that change.

The statistical distribution shown in the Probability of Running Out of Money chart is also shown in graph form at the end of the Portfolio Planning Report, on page 10 of QPP.

Portfolio Stats: These are merely reproduced here for your convenience; they are the same as those at the top right of page 3 of QPP. Portfolio Beta: This is the same as Simulated Portfolio Beta, copied from page 3 of QPP for your convenience.