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Step by Step: Hypotheticals

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Dollar cost averaging is a very popular investment strategy for helping your clients accumulate wealth over a long period of time. But what happens when your clients reach retirement age and need to start taking money out of their account? With life expectancy at its highest, your clients need to make sure that their retirement income lasts.  However, some of your clients may be hesitant to keep their investment in mutual funds and might be considering a less aggressive investment vehicle, such as a GIC. Using Globe HySales, you can easily show your clients the benefit of investing in a mutual fund that continues to grow, even while they make withdrawals to supplement their income.

For this example, we’ll compare a mutual fund to a fixed rate security to show your clients the benefits of maintaining their retirement savings in a mutual fund. Click the ‘Hypothetical View’ button < >   and choose the ‘Comparison’ radio button. Under the ‘mutual fund’ database, choose your favorite equity fund and move it to the ‘Selected Items’ box.

Next, under ‘Fixed Rate Security’, click the <Add to Contents> button. Choose an ‘Independent’ security earning an annual percentage rate of 5%. Click <OK>.

Next, select the ‘General’ tab. Click the ‘Apply Changes To’ dropdown box and select the equity fund. Click the ‘Scheme’ dropdown box and select ‘Systematic Withdrawals-Increasing Dollar’. Set the initial investment as $100,000 and the ‘Period’ as ‘Since Inception’. At the bottom, type in $500 in the ‘Amount’ box and increase the amount by 3% each year (to reflect inflation).  Under the ‘Frequency’ dropdown box, choose ‘1 Month’. Click the ‘Apply Changes To’ dropdown box and choose ‘Independent Fixed Rate Security 5.00%’. Under the ‘Scheme’ dropdown box, choose ‘Systematic Withdrawal Increasing Dollar’. Again, set the initial investment as $100,000 and the ‘Period’ as ‘Since Inception’. In the ‘Amount’ box at the bottom, type $500 and increase it by 3% every 12 months (again, to reflect inflation). Under the ‘Frequency’ dropdown box, choose 1 months. Click <OK>. 

You now have a variety of charts and graphs that show your clients the benefit of investing in a mutual fund where they can withdrawal money to supplement their income, while still making a profit on their investment.

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