Updated Saturday, March 28, 2015 as of 5:27 AM ET

Reality Check: Just How Risky Are Stocks?

Think stocks aren't for the risk averse?

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Comments (1)
Very valuable research and reporting! Thanks to Pfau, Finke, and Blanchett!

Their work reinforces evidence from the U.S. stocks asset class over the last century showing that over longer terms, dispersion of results becomes much less than shown by the random walk standardly assumed in Monte Carlo simulation.

Some sort of reversion toward some mean is at work, but there is no surefooted way to model that, because there are many ways to do so and woefully inadequate evidence to choose among them.

We've developed a way to explore effects of this reversion on prospects for clients' long-term dollar goals without making assumptions about how the reversion works. It's included in our newest version of Portfolio Pathfinder.

As the Pfau-Finke-Blanchett research confirms, this effect sure is worth exploring. From U.S. stocks history it appears to reduce uncertainty of 30-year results to only half that shown by traditional Monte Carlo!

Dick Purcell

Posted by Dick P | Tuesday, February 18 2014 at 3:50PM ET
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