The Index Portfolio Simulator
 
 
IFA Index Portfolio
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Chart Mode:
Probable range of annualized % outcomes, where Y axis is density and total of all bars = 1.0.
Random ending wealth among the probable outcomes.
  Time Series
  Portfolio Series
  Dice Comparison

The Index Portfolio Simulator

The portfolio simulator includes 35 years of Backtested Performance Information for the 20 index portfolios and a Simulated SP500. Each time you click on an index portfolio or chart mode, you will generate a random monte carlo simulation (the markets are random in nature) of the possible outcomes of annualized returns or growth of your starting investment within the risk and return parameters specified.

  1. Other Portfolio Portfolio: Input data on your portfolio based on 20 years (preferably 35 years) of risk and return characteristics. You can then compare it to the 20 IFA Index Portfolios, after both DFA and IFA fees for the entire period and a Simulated SP500.
  2. IFA Index Portfolio: Click on the portfolio that was recommended in your Investment Policy Statement at the end of your Risk Capacity Survey.
  3. Ending Wealth is expressed as the average or Expected Return based on the last 50 years of Backtested Performance Information (see footnote below), but is definitely not a guarantee of future returns.
  4. Also see this retirement calculator. The following three articles are useful in understanding the difficulty in determining how long your money will last: A few good rules of thumb are to save 10% or more of your income, invest in a portfolio matched to your Risk Capacity at all times and don't spend more that 5% of your portfolio per year in your retirement.
  5. Chart Mode: Change the Chart Mode to Ending Wealth, and you will see the randomly generated Monte Carlo Simulation of the balance after the time horizon specified in the table and the average or expected value of the range possible outcomes, based on the last 50 years*. Past performance does not guarantee future results.

Instructions for the Portfolio Simulator:

Roll over row headings on left to review information about each heading, which will appear in this space. Areas in gray will calculate automatically. You can input your own data from your current portfolio(s) in the data boxes. Click on the IFA portfolio that was recommended at the end of your Risk Capacity Survey. You will see back tested data from the last 50 years. Click the button. You will then be able to compare the portfolios. See expanded instructions below. If you need assistance, please call an index funds advisor at 1-888-643-3133.

"Odds are, you don't know what the odds are." - Gary Belsky and Thomas Gilovich, Why Smart People Make Big Money Mistakes
"Chance favors the prepared mind." - Louis Pasteur

Expected Risk:
What is the Annual Expected Risk (standard deviation) based on at least 50 years of past data? IFA index portfolio data is 50 years simulated data. (Jan 1959 to Dec 2008)

Expected Return:
What is the Annual Expected Return (%) based on at least 50 years of past data?

IFA index portfolio data is 50 years of simulated backtested performance data. A maximum management fee of 0.9% and the current DFA expense ratios have been deducted from the returns of the index portfolios for the entire 50 year period.

Note: The default number of 3.17% in OTHER column is based on the Dalbar Study. You can alter that number. The current the DALBAR study can be found here. This is before inflation and taxes.

Fees & Expenses:

What are the Annual Mutual Fund Fees (%), commissions, loads and Advisor Fees (%)? You can also add a % to be deducted from your account for future withdrawals, like 5% or 6% per year. Note: The average annual mutual fund fees are about 1.5% and the average annual fees for financial advice is 1.5%, or 3.0% total. Commissions average 1 to 2%, loads average 4.5% and transactions costs are 0 to 3%. Schwab transaction fees average 0.20%/yr. based on $100,000 invested in Index Portfolio 90 through 100 over 10 years. For Index Portfolio 85 or lower, it would be 0.24%.

(Sources: Morningstar, Money Magazine and Schwab) DFA current expense ratios and IFA fees of 0.9% are deducted from the returns in the backtested performance data.

Taxes and Inflation:
What is the estimated annual percent taxes for your entire portfolio? We would estimate 1.7% or more of total assets for actively managed equity funds. Tax-managed index funds result in very low taxes, for example:

Index Portfolio #
Tax Impact
Index Portfolio 100 0.80%
Index Portfolio 95 0.83%
Index Portfolio 90 0.87%
Index Portfolio 85 0.88%
Index Portfolio 80 0.90%
Index Portfolio 75 0.92%
Index Portfolio 70 0.93%
Index Portfolio 65 0.95%
Index Portfolio 60 0.97%
Index Portfolio 55 0.98%
Index Portfolio 50 1.00%
Index Portfolio 45 1.02%
Index Portfolio 40 1.03%
Index Portfolio 35 1.05%
Index Portfolio 30 1.06%
Index Portfolio 25 1.08%
Index Portfolio 20 1.10%
Index Portfolio 15 1.11%
Index Portfolio 10 1.13%
Index Portfolio 5 1.15%

Line 4 in the simulator includes 1.18% of taxes based on Portfolio 70. For other index portfolios you may adjust the number according to the table above.

If you would like to adjust for inflation, we would suggest adding 3.1% to both boxes in this row.

Note: Inflation: From 1927 to 2010, inflation was 3.1% annualized. It was 5.2% from 1973 to 2000, 3.4% in 2000, and 13.3% in 1973.

Taxes: If you are in a tax-deferred account, taxes are not paid until withdrawal. Roth IRAs are pre-paid tax accounts, allowing your assets to grow tax free.

Time Horizon: Enter the period of time that best represents the holding period of your investment. Then change the period to 1 year, 5 years, 10 years and 20 years and notice how the chart below changes. The possible outcomes narrows with time and the compounded return grows. The standard deviation of annualized returns declines by the standard deviation of one year divided by the square root of the number of years. The histogram presents the lower standard deviation adjusted for years in line 6.

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 Backtested Performance Info
 

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DISCLAIMER: THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION POSTED ON THIS OR ANY LINKED INTERNET SITE. At certain places on this Index Funds Advisors Internet site, live 'links' to other Internet addresses can be accessed. Such external Internet addresses contain information created, published, maintained, or otherwise posted by institutions or organizations independent of Index Funds Advisors. Index Funds Advisors does not endorse, approve, certify, or control these external Internet addresses and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, timeliness, or correct sequencing of information located at such addresses. Use of any information obtained from such addresses is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference therein to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by Index Funds Advisors.Your use of this site is acknowledgment that you have read and understood the full disclaimer. Past performance does not guarantee future results.

WARNING: Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any mutual fund, index or actively managed, does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. Actively managed funds sometimes outperform index funds. You just don't know in advance which actively managed fund will outperform the appropriate index. Just because a mutual fund is an index mutual fund, it does not guarantee a performance superior to an actively managed mutual fund. There are no absolute guarantees in investing. When reviewing any backtested performance information on this internet site, please read the Disclosure for Backtested Performance Information (click here to read the Disclosure for Backtested Performance Information.) For a copy of the Index Funds Advisors, Inc. Privacy Policy, click here.

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