A Seeking Alpha reader showed interest in the 10-ETF Portfolio and asked how such a portfolio might stand up under a stress test as I applied to another portfolio. Before running such an analysis, one needs to understand the assumptions. For this analysis I assume the investor is 45 years old, has saved $250,000, saves $12,000 per year, and will retire on $50,000 per year upon retirement in 2032 at age 66. Inflation is assumed to be 3.5%.
The chances of running out of money are not all that great. While I would like to see that 10% chance begin somewhere in the 80s, I'll settle for the Monte Carlo probability results shown below. Now we need to see what happens when a three sigma event occurs and we lose nearly 50% of the probability.
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