Week 45 Day 2: Historical vs. Forward-Looking: Choosing Your Inputs

The inputs you feed a Monte Carlo simulation determine its output. Using historical averages (10% stocks, 5% bonds) produces optimistic results. Using forward-looking estimates based on current valuat...

The inputs you feed a Monte Carlo simulation determine its output. Using historical averages (10% stocks, 5% bonds) produces optimistic results. Using forward-looking estimates based on current valuations (7-8% stocks, 3-4% bonds) produces more conservative -- and more honest -- projections. Your inputs matter more than the simulation itself.