FYI: IN JANUARY 1946, a man named Stanislaw Ulam found himself confined to a hospital bed, having suffered an encephalitis attack. A brilliant scientist and a veteran of the Manhattan Project, Ulam wasn’t the type to sit idly while he recuperated. Instead, after playing innumerable games of solitaire to pass the time, Ulam began to examine the statistical aspects of the game.
Regards,
Ted
https://humbledollar.com/2019/03/rolling-the-dice/
Comments
Since the referenced article talked Monte Carlo analysis, you likely anticipated I might contribute a comment or two. You were right.
The article summarized some of the benefits of Monte Carlo, but also highlighted what the author believed were shortcomings of that tool. Yes, every tool that projects the future has shortfalls. The future is uncertain. But that’s precisely the reason to use a tool that allows for thousands of possibilities.
The range of those possibilities depend entirely on the user’s sensibilities. It can reflect history or any part of history, or just be a total guess. The tools available today are fast and easy to use. One simulation is just not enough. A single analysis really should be multiple analyses to explore reasonable possibilities. True the simulation results should be interpreted with caution. That’s true of any analysis, of any future projection. Rolling the dice thousands of times yields data on the odds of unknown outcomes.
I like the Monte Carlo simulation offered by Portfolio Visualizer. Here is the Link to that tool:
https://www.portfoliovisualizer.com/monte-carlo-simulation#analysisResults
Please give it run. You just might be surprised and become hooked. I was. What-if scenarios do give insights into what is important and what is noise.
Best Regards