the tool in its proper place. But it's not megaphone worthy - just ringing a small bell worthy. Some just use random numbers within a specified range, and there are so many iterations that essentially all variables within that range are simulated (and duplicated many times too) Or sometimes inputs and ranges are not internally randomly generated, but manually defined by the user. AFL Overview, paramter, value, preferred Timeframe. If you don't believe that, then ask clients what they remember about your financial plan presentation that's more than a week old. The point is that in retirement planning, each one of those 2's have dozens of associated random variables attached. That's why it doesn't work. Then by using Excel's built-in Goal Seek function, you can also easily solve for most any What-if you can think of - like determining the minimum rate of return needed on all investments, and/or just one investment account at a time, to reach the retirement. You can give up portfolio optimizers and/or Monte Carlo simulators in your practice about as much as you can give up whatever the "beer" is in your personal life.
So they vary that one-dimensional input, and then the simulator can produce valid results. So a new mini-academic-fad was born. Options and futures are contracts, where if the price of this does this, then this happens. Their iToy has to be new, shiny, high-tech, and better than before, or they won't make the sale. So don't get all excited about Monte Carlo programs being added to personal investment software - it's mostly still just marketing at this point. Then with a probability distribution curve, one can generate meaningful statistical data, like standard deviations. But customers kept asking for it, so we implemented it into the.
The only other goals it can solve for are things like college planning. It's just as simple as that. Insurers and oil well drillers also use them. So if you're wondering why client's say, " Time out, I need a coffee bathroom smoke break!