Monthly Archives: April 2014

What are the True Risks of Stock Crash?

A study by Brandeis Professor Blake LeBaron shows that ten year stock market crashes are not that rare. When adjusting for inflation the odds jump from 7% to 12%. My view is that in financial planning one tries to estimate the probability of outliving one’s money by using Monte Carlo simulation.  When choosing between a 5.9% rate of return versus and 7.4% return the probability of a successful retirement was significantly higher using the lower hypothetical rate of return. This is because in order to get a higher rate of return one must incur a higher level of risk and some unfortunate people will fail and run out of money during a crash and thus be unable to benefit from

2017-01-10T23:33:49-08:00 April 24th, 2014|mayflowercapital blog|Comments Off on What are the True Risks of Stock Crash?