Goal Tracker
The Goal Tracker is a planning tool that projects the hypothetical performance of your client’s portfolio and monitors how likely they are to achieve their goal. You set the inputs - such as monthly contribution amount and target risk and return as well as your client’s goals and see the projections and the likelihood of achieving those goals.
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Click Menu in the top left corner > Administration & Tools > Goal Tracker
Why Run Simulations?
The future is unpredictable. Markets are volatile and future portfolio value can vary significantly, which is why it is important to consider several different return paths that a portfolio can take. Some paths will result in performance that exceeds expectations, while other paths may result in performance that disappoints. The Goal Tracker uses a commonly used statistical simulation technique called Monte Carlo, to simulate a range of paths for portfolio performance, based on your set target risk/return numbers.
Goal Tracker Tool
The tool displays the likelihood of meeting pre-set goals. It alerts clients that, based on inputs, the chances of meeting their goal are either ‘on target’ (greater than 75%) or ‘manageable’ (50-75%) or ‘at risk’ (25-50%) or ‘off target’ (1-25%) or ‘not achievable’ (less than 1%).
Assumptions and Disclosures
The goal tracker allows the user to set varied goals - e.g. vacation expense, medical expense, house down payment, college expense, retirement spending etc. Most of these goals require the user to just indicate a goal amount and a goal target date. For many of these goals, the goal tracker assumes a lump sum outflow on the target date. Exceptions are the college goal and retirement goal. The college expense goal assumes 4 annual payments, rather than a single payment. The retirement goal assumes monthly outflows for expenses, as well as monthly inflows for social security check. All future inflows and outflows are adjusted for inflation. We assume an inflation rate of 3% which is consistent with the average observed inflation rate over the last 20, 40, 60, 80 and 100 years during which period inflation has fluctuated between 2 and 4%2. All outflows are after-tax and assume a long-term capital gains tax of 20%. While capital gains can be taxed at 0%, 15% or 20% depending on income, we take a conservative approach and assume that the client is paying the highest rate.
Caveats and Disclosures
The tool’s estimates and projections are hypothetical in nature, do not reflect actual investment results or the realized returns of any portfolios, and are not guarantees of future results. There is no guarantee that your client will reach their goal(s), and assumptions not used in this tool and other market developments can affect the probability of reaching their goal(s). The tool’s estimates and projections can vary with each use and over time. These estimates and projections are provided for informational, educational and illustrative purposes and are not intended to constitute and should not be relied on as a full financial plan, comprehensive financial planning, legal or tax advice. Interactive Brokers does not in any way represent that the estimates generated using this tool are based on or meant to replace a comprehensive evaluation of a client’s entire personal portfolio. None of the tool’s projections should be construed as an offer, recommendation or solicitation to buy or sell any security. Past performance is no guarantee of future results, and all investments, including those in any portfolios, involve the risk of loss, including loss of principal (the money you invest) and a reduction in earnings. Returns reflect the reinvestment of dividends.