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A portfolio with consistent annual market growth of ...
Old 11-01-2009, 05:11 PM   #1
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A portfolio with consistent annual market growth of ...

I was comparing FireCalc to another calculator, and to get apples and apples on the 'Your Portfolio' tab selected 'A portfolio with consistent annual market growth of n%, fixed income returns of m%, and an inflation rate of x%' because that is all the other calculator supports. While I realize this is probably not the way FireCalc was intended to be used, it's the only way I can make a valid comparison.

How does FireCalc know how much I have in the market vs. fixed income when 'A portfolio with consistent annual market growth of ...' is selected?

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Old 11-01-2009, 06:07 PM   #2
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I don't think it does. It just assumes that whatever the equity/bond percentages, you get the annual market growth and yield that you specify.

If you want to specify the percentages, and let Firecalc figure out what you get out of it, you would choose "Total Market" or "Mixed Portfolio".

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Old 11-09-2009, 12:01 PM   #3
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It appears that FireCalc completely ignores what you enter for the market growth percentage, and treats the entire starting amount like fixed income applying what you enter in "Fixed income returns of ...".

Here is how to see it:
Start with default settings: Spending 30000, Portfolio 750000, Years 30.

Change spending to 0.

Go to the Your Portfolio Tab.

Set the investment expense ratio to 0.

Click "A portfolio with consistent annual growth of".

Set the annual growth percentage to a non-zero number of your choice -- 1, 10, 100, 1000 -- it won't affect the outcome.

Set fixed income returns to 0%.

Set inflation to 0%.

Submit. Look at the results graph. The portfolio value does not change.

Now, change the fixed income returns to something predictable. A consistent return of 7.2% should roughly double the portfolio every 10 years. Look at the result. It doubles every 10 years.

Am I missing something?

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