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Let’s Get Bootstrapping

Your goal with a Monte Carlo bootstrap is producing probabilities based on a set of assumptions—starting portfolio value, cash flow levels and time horizon. To give you a general idea, the following scenarios (Tables 6.1 through 6.4) show the impact of differing inflation-adjusted cash flows on a hypothetical $1 million portfolio.

Table 6.1 Scenario 1—$100,000 from $1 Million (10%)

Source: Global Financial Data, Inc., as of 01/06/2012, Thomson Reuters, S&P 500 Total Return Index,1 US 10-Year Government Bond Index, Consumer Price Index from 12/31/1925 to 12/31/2011.

Table 6.2 Scenario 2—$70,000 from $1 Million (7%)

Source: Global Financial Data, Inc., as of 01/06/2012, Thomson Reuters, S&P 500 Total Return Index,2 US 10-Year Government Bond Index, Consumer Price Index from 12/31/1925 to 12/31/2011.

Table 6.3 Scenario 3—$50,000 from $1 Million (5%)

Source: Global Financial Data, Inc., as of 01/06/2012, Thomson Reuters, S&P 500 Total Return Index,3 US 10-Year Government Bond Index, Consumer Price Index from 12/31/1925 to 12/31/2011.

Table 6.4 Scenario 4—$30,000 from $1 Million (3%)

Source: Global Financial Data, Inc., as of 01/06/2012, Thomson Reuters, S&P 500 ...