Week 45 Day 3: Historical Backtesting vs. Monte Carlo: Two Ways to Stress-Test

Historical backtesting replays your plan through actual past market conditions (the Great Depression, the 1970s stagflation, the dot-com crash, 2008). Monte Carlo creates random hypothetical scenarios...

Historical backtesting replays your plan through actual past market conditions (the Great Depression, the 1970s stagflation, the dot-com crash, 2008). Monte Carlo creates random hypothetical scenarios. Both are useful: backtesting shows how your plan performs in known worst cases. Monte Carlo shows how it performs across a wider range of possibilities.