Comment by Spooky23
10 hours ago
None of these things are oracles. The Monte Carlo helps you visualize the universe of outcomes. Simulating past events helps you specifically apply your knowledge of the past to your portfolio.
Think of it as a tool to understand and explore risk. I’ve found all of these tools more useful as a I get older and the day I need to use the cash is closer.
I agree that it’s a tool to explore risk. I just think it’s more useful if you pull the likely universe of outcomes from the sequences of the past (sliding your retirement across multiple starting dates) more than worry about what happens if we get multiple -43% years in a row. There’s no realistic portfolio that will survive that, but also no realistic underlying economic model where that happens (or if it does, where what you have saved really matters).