This is a simple financial simulation of Sal, a salaried person who works from age 20 to 60, then lives a retired life until age 85.
You are Sal's advisor and advise him a single consistent investment strategy for the funds coming from his savings and returns on investments. The allocation strategy will be applied at end of each year; this will also rebalance the portfolio.
The score is Sal's final inflation-adjusted net worth in mulitples of Sal's annual starting salary.
If Sal's investements do badly or expenses are more than revenue, Sal's net worth will decrease and may even go negative. Then he has to live off borrowings at 10% interest, and so, subsequently his net worth keeps going more negative every year. Therefore, with bad investement or insufficient savings rate, the final score may be negative.
There is a random element in returns from debt or equity, so the score will vary across runs. Extremely lucky runs can amass huge net worth.
For full details, see "dmrmoney" blog for post no. 7: 'Playing the Retirement Game'
| The Controls | |
|---|---|
| Expense Ratio | Expenditure as percentage of salary (not going into savings) |
| Allocate | Divide investments into classes |
| Fixed Deposit | Fixed income, low risk |
| Debt Fund | Debt instruments, medium risk, tax efficient |
| Equity | stock market, high risk |
| Chance of Loss | Probability that investment will go into loss |
| Number of Runs | repeat the game N times |
| Start | Click button to run the game N times |
| Display Results |
|---|
The output is a histogram that puts the individual scores of the N runs into buckets for different score ranges. The height of each bar is the number of runs that fall into that bucket. An ideal strategy would be
Note: In case of 100% investements into Fixed Deposits, all scores are identical and only a single fat bucket is created. |