@RISK and Monte Carlo Simulation Help Investors Meet Financial Planning Goals
Retirement is becoming a very hot topic. With advances in medical technology and population increases, planning for the future is more important than ever. Financial advisors need to take advantage of the latest technologies, and that includes @RISK and Monte Carlo simulation:
As advisers, we have a major job of "reality education" ahead. Our clients need to be educated regarding the necessity of investing for total return and "real" cash flow (i.e. inflation adjusted), not dividends and interest. That means investing for the long term and staying invested during the short-term volatility.
We must help clients address these issues and make more informed choices as they plan their retirement. We can assist by using sophisticated capital needs analysis with detailed scenario planning.
For example, if you're not currently using Monte Carlo simulation software for adding scenario as well as point estimates to your capital needs evaluation, spend the better part of a weekend investigating how it can help you capture the virtual retirement reality. Using Monte Carlo simulation software, you can build in various probability distributions for any event to give your clients a more realistic view of the probability of meeting their goals under various scenarios. One good choice for Monte Carlo simulation is @RISK by Palisade Corporation. Deena B. Katz, "The QWERTY of Retirement," Financial Planning, June 1997
We don't think you'll need a whole weekend to see the benefits of @RISK and other DecisionTools products. Find out how to add the combined power of risk and decision analysis to your spreadsheet models with @RISK!