MaxiFi’s Comfort Index lets you compare investing strategies – your planned current and future portfolio holdings –with safer and riskier alternatives. The Comfort Index considers not just the riskiness of your strategy, but also your risk tolerance.

We infer your risk tolerance by asking, “How much risk are you willing to accept?” You can answer *Almost None, Very Little, Moderate, Some*, and* A Lot*. Each response is used to set the value of a parameter entering a mathematical formula for the happiness you enjoy from having a higher living standard. If your risk tolerance is, say, *Almost None*, the formula produces a small increase in the happiness formula from a given increase in your living standard. But it produces a very large decease from the same-sized drop in your living standard. This is what economists call risk aversion – caring a lot more about the downside than the upside.

The Comfort Index measures your average lifetime happiness associated with your current investing strategy and two alternatives – a riskier and a safer strategy. Each average is based on MaxiFi’s running 500 living standard trajectories, which take random draws of returns, each year, based on the investment holdings you’ll be holding that year.

Your living standard ups and downs along each trajectory reflect the performance of your investments as well as our underlying assumption that you spend cautiously – as if you’ll always earn the real return on 30-year Treasury Inflation Protected Securities. (This is MaxiFi’s default assumption. If you’ve changed, under Settings and Assumptions, either the default nominal rate of return or the default inflation rate, then your spending behavior will be different than the default assumption.)

The Comfort Index for your current investing strategy is set to 100. The Comfort Index for your riskier and safer strategies will be higher or lower than 100 if those alternatives deliver higher average lifetime happiness.

Suppose, based on your degree of risk tolerance and other inputs, that your Comfort Index from your safer strategy is 110 and that it’s 93 from your riskier investing strategy. This means that switching from your current to your safer investing strategy will deliver 10% more lifetime happiness, on average, than your current investing strategy. On the other hand, in this case, investing in the riskier strategy will deliver 7% less lifetime happiness. This means that switching from your current to your riskier strategy will deliver 7% less lifetime happiness, on average.

To be precise, the safer investing strategy’s 110 Comfort Index means that choosing the safer investing strategy would, on average, be as good as sticking with your current strategy, but being able to spend 10% more each year no matter how well your current strategy performs. And the riskier investing strategy’s 93 Comfort Index means that following the riskier strategy would, on average, be as good as sticking with your current strategy, but being forced to spend 7% less each year no matter how well your current strategy performs.