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Subject:  Re: Planning Date:  6/24/1999  1:14 PM
Author:  TwoCybers Number:  611 of 20632

I haved used Quicken's Financial Planner and find it to be better then those I tried which were written by brokerage houses. (In fairness to current products, I made this comparison over a year ago.) What I like about the Quicken product is you can change just about anything independently. i.e. general inflation at x% and return on stocks at some other %

There is a serious limitation which applies to the quicken product (and as far as I know to all such products). This is the problem. Assume you are looking at a 10 or 15 year period and select an average return of say 15%. There will be some years above 15% and and some below. Even if the average of the individual years in 15%, your actual income will not necessarily be 15% compounded. For example assume you use a 10 year period and loose 10% in year 1, loose 5% in year 2 and gain 20.625% in each of the remaining 8 years. The average gain is 15% in each year. The actual value of $1,000 have after these 10 years will be $3,832.34. If you compound 15% every year, $1,000 would be $4,045.56 after 10 years.

The point is in any given real world situation, even a reasonable and accurate average assumption may not be realized. The greater the length of time for your plan, the less this type of distortion will be.

Good luck.
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