Because the future is both uncertain and unknowable, investment planning frequently involves efforts to simulate or “model” the future. Given certain investment decisions, how likely is it that a particular portfolio will succeed in reaching the goals set for it? For example, will a portfolio provide enough retirement income to last the owner’s lifetime? Will the expected investment results pay for a child’s education?
One way to analyze such questions is through use of a “Monte Carlo” simulation. Learn more below!
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