Upside Investing

When you are running the program in Upside Investing mode, you tell the program how much you currently have invested in stocks for both regular assets and retirement assets, how much you intend to add to your stock holdings (for both regular and retirement assets) through time, and when you expect to start and stop converting your stocks to safe assets.

The program then sets your living standard floor assuming that all your current and future investments in the stock market are entirely lost. But the program also runs simulations to show you the chances of different upsides—different living standards above the floor—once you start converting your stocks into safe assets.

In Upside Investing mode the program assumes you are investing in just two assets—safe assets and risky assets (the S&P 500), and doesn’t spend any of your risky assets until they have been converted to safe assets. The program asks for each of the two asset pools: how much you have in stocks, how much you will add to your stocks, and when you will begin and finish converting your stocks to safe assets? When you run the program it does two things: First, it establishes a living standard floor assuming your stocks lose all their value. Second, it shows you the probability of experiencing a higher living standard once you start converting your stocks to safe assets.

In the Assets and Saving panel (see screen shot below), you are asked to indicate the percentage of your current regular assets invested in stocks. You are also given a place to indicate how much future investment of regular assets you want invested in stock. When you are not in Upside investing mode, you are not asked about contributing future investments to regular assets (but you are asked about contributions to retirement assets). In Upside mode, you can add to your pool of regular assets through annual contributions—and if you do, the program wants to know what percent of those will go into stocks.

With regard to your retirement assets (see screen shot below) you are also asked about the current ratio of stocks to safe assets as well as the ratio of stocks to safe assets of all future contributions.

Both of these input screens also ask about the year you want to begin converting stocks to safe assets and the year you want to complete this gradual conversion to safe assets. When you run in upside-investing mode, the program converts your stocks into your safe asset starting in the first year of conversion and ending in the last year of conversion. If there are, for example, 20 years of conversion left, the program converts one 20th of your risky assets to safe assets. The following year it converts one 19th, etc.

After setting these percentages and dates, you can complete the Upside Investing inputs by telling the program the rate of return you expect to earn on safe assets.

For help reading the Upside Investing report, see the reports section in this help file.