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Running an Investment Portfolio Adjustment Scenario
Your investment portfolio plays a major role in determining your financial future.
With the Scenarios feature in PocketPlan, you can test how changes in your asset allocation affect your:
- Retirement Score
- Financial Freedom Number (FFN)
- overall risk exposure
Objective: Balance Risk and Return
Every portfolio decision involves a trade-off:
- higher risk → higher potential returns
- lower risk → more stability but lower growth
PocketPlan evaluates this using Monte Carlo simulations, factoring in volatility (σ) to show realistic outcomes.
👉 The goal is to find the optimal balance between growth and stability.
Step-by-Step: Create an Investment Scenario
Step 1: Start a New Scenario
Create a scenario with a clear name such as:
- “High Growth Portfolio (80/20)”
- “Conservative Allocation (40/60)”
Step 2: Access Your Portfolio Settings
Go to the Portfolio / Investments section inside the scenario.
Step 3: Adjust Asset Allocation
Modify your allocation mix.
Example:
- Base Plan → 60% Stocks / 40% Bonds
- Scenario → 80% Stocks / 20% Bonds
👉 This increases expected returns but also increases volatility.
Step 4: Automatic Recalculation
PocketPlan instantly updates:
- expected long-term returns
- volatility (σ)
- simulation outcomes
Step 5: Analyze Results
Check Volatility (σ)
Higher stock allocation increases volatility, meaning:
- bigger gains
- but also bigger losses
Check Retirement Score
- may increase slightly due to higher expected returns
- but worst-case scenarios may become significantly worse
Understanding Risk vs Outcome
Increase Risk (More Stocks)
Impact
- higher potential Retirement Score
- more extreme negative outcomes in downturns
Best For
- younger investors
- long-term horizons
- ability to recover from market drops
Decrease Risk (More Bonds)
Impact
- slightly lower potential score
- more stable and predictable outcomes
Best For
- near retirement
- protecting existing wealth
- avoiding major losses
Advanced Strategy: Stress Testing Your Portfolio
To fully evaluate your strategy:
👉 analyze the bottom 10% outcomes in your simulation
This shows:
- worst-case scenarios
- how your plan performs under stress
Key Insight
If the worst-case outcome is unacceptable:
👉 reduce risk until the scenario aligns with your comfort level
Why This Scenario Matters
Asset allocation is one of the most powerful levers in financial planning.
Even small adjustments can significantly impact:
- long-term wealth
- retirement success probability
- financial stability
Key Takeaway
An Investment Portfolio Scenario helps you make smarter decisions by balancing risk and return.
By testing different allocations and analyzing both best-case and worst-case outcomes, you can build a portfolio aligned with your long-term financial goals.
Frequently Asked Questions
What is asset allocation in PocketPlan?
It is the percentage split between different asset types like stocks and bonds in your portfolio.
Does increasing stock allocation improve my Retirement Score?
It may increase expected returns, but it also increases risk and potential losses.
What is volatility (σ)?
Volatility measures how much your investment returns can fluctuate over time.
Should I take more risk when I am younger?
Generally yes, because you have more time to recover from market downturns.
