Pathfinder takes you past the diversions — past the short-term measures deceptively labeled “expected return” and “risk,” beyond the questionnaires designed to misfocus your attention on your short-term fears. Instead, it informs you for making best choices for your investment purpose, your future dollar goals.
Based on your dollar plan and goals and selection of asset-class portfolios to consider, Pathfinder offers an unrivaled set of investment-comparison graphs to inform you for judging best choices for your financial future:
1. The Goal Frontier – the zero-in graph, comparing an entire range of portfolios in probability of meeting your future dollar goals
This graph compares an entire range of portfolios – compares them in probabilities of building your dollar investments to meet your future dollar goal. The portfolios range from most conservative on the left to most aggressive at right. For each investor, these graphs are prepared for his dollar plan and goals. On his Goal Frontier graph, illustrated below, the portfolios highest on the graph offer best probabilities of meeting his future dollar goals.
From the goal-meeting probability heights of the highest, you can judge the feasibility of your dollar plan and goals.
And you can pick any two of the best from this graph, for closer comparison on three more graphs:
2. How far above or below my goals might results be?
On this second graph, you can see how portfolios differ in spread of result probabilities. Height shows how high the final value may be. For each portfolio, at heights where its shape is wider its result is more likely to be. In this example, the blue portfolio is almost certain to deliver a quarter million up to one million, while the red’s more spread-out possibilities reach far higher — and lower too.
On this graph you can scroll to your goal, and scroll to other target heights. At whatever height you scroll to, you will see a white horizontal “goal line” crossing the portfolios’ colored areas at that height. And just above that goal line, colored numbers show the portfolios’ probabilities of reaching that height. In the illustration above, the investor has scrolled up to his goal of 0.6 million, and the colored numbers just above the goal line show that the red portfolio has better probabilities of teaching that height.
3. What are the probabilities for dollar value year by year through the life of the plan?
This graph shows, for any one portfolio or comparison of any two, value probabilities for end of every year through the life of the investor’s plan. Specifically, it shows for each year the value heights a portfolio has various probabilities of beating, using for each year the symbol labeled in the key in the graph’s upper left.
In any year, a portfolio has 95% probability of value higher than the bottom of that year’s thin vertical line, 80% of higher than the bottom of the thicker vertical line, 50% probability of higher than the horizontal line . .
To help users read and use this graph, Pathfinder has interactive tools for displaying the value a portfolio has any of five probabilities of beating in any year.
This graph is especially valuable for investors who have goals along the way to the end of the plan, such as financing of children’s education. And for almost all investors, it is helpful in seeing when risks of falling short of goals in the years ahead may appear.
4. What kind of path of ups and downs is my dollar value likely to follow through the life of my plan?
With this graph the investor can see, for any one portfolio or comparison of any two, any number of individual simulation examples of the kind of year-by-year path of ups-and-downs in dollar value a portfolio is likely to deliver through the life of the investor’s dollar plan.
This graph, together with the others shown above, counters the widespread teaching of misguiding investors to base long-term investment on fear of short-term ups-and-downs. This is commonly done without showing investors, for their plans, either (a) the paths of short-term ups-and-downs or (b) how choices compare and which are best in prospects for her future.
In this graph, investors can see that among competitive asset-class mixes, those with smaller ups-and-downs also have less growth potential, and thus more assurance of lower longer-term results. This can increase the investor’s real risk — risk of falling short of his longer-term dollar goals.
From this graph, along with the others above, investors are informed to see how portfolios compare in both short-term ups and downs and result probabilities for their longer-term dollar goals, and thus informed to judge the choices that best fit their dollar plans, goals, and priorities.