Comments on: Personal Finance and Simulation Modeling http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/ Article and URL Archive Tue, 09 Mar 2010 17:12:33 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: My 1st Million At 33 – yes, you can do it too » Blog Archive » Personal Finance Carnival #63 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-104672 My 1st Million At 33 – yes, you can do it too » Blog Archive » Personal Finance Carnival #63 Tue, 09 Mar 2010 17:12:33 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-104672 [...] Simran Gill: Personal Finance and Simulation Modelling. Using Monte Carlo simulation to project a future [...] [...] Simran Gill: Personal Finance and Simulation Modelling. Using Monte Carlo simulation to project a future [...]

]]> By: davidbaer http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-103024 davidbaer Sat, 06 Feb 2010 06:18:41 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-103024 If You Are Tired of Wasting All Your Money on Online Advertising for Your Websites… “Discover the Proven and Simple Methods Used By the Pros to Get 100% Free Online Advertising Traffic Your Website!” It does not matter if your looking for just a couple of hundred extra hits a month or to pump your website full of as much traffic as you possibly. www.onlineuniversalwork.com If You Are Tired of Wasting All Your Money on Online Advertising for Your Websites… “Discover the Proven and Simple Methods Used By the Pros to Get 100% Free Online Advertising Traffic Your Website!” It does not matter if your looking for just a couple of hundred extra hits a month or to pump your website full of as much traffic as you possibly.

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]]> By: Carrie http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-53915 Carrie Fri, 14 Sep 2007 09:25:09 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-53915 That was a very interesting idea, I planned to make similar graphics for my credit card debt. That was actually one of the major spending issues in my finance, and <a>credit card</a> expert site said it is crucial to make your debt visible to reduce spendings... Anyway, you gave me inspiration))) That was a very interesting idea, I planned to make similar graphics for my credit card debt. That was actually one of the major spending issues in my finance, and credit card expert site said it is crucial to make your debt visible to reduce spendings… Anyway, you gave me inspiration)))

]]> By: scriber http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-36163 scriber Wed, 16 May 2007 00:29:41 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-36163 “Personal Finance and Simulation Modeling� is a excellent way of thinking and looking about our finance. As your life's change for must our finances and we need to keep changing our model to what works best for us. "Find Out if Consolidating Your Debt is Your Answer to Having More Cash in Your Pocket and a Happier Life!"<a>Consolidating Debt</a> to include our ever changing life style and careers mean consolidation is a great item to add in our possible option. These options should allow us more personal cash and more personal peace and happiness and times with our familes. “Personal Finance and Simulation Modeling� is a excellent way of thinking and looking about our finance.

As your life’s change for must our finances and we need to keep changing our model to what works best for us.

“Find Out if Consolidating Your Debt is Your Answer to Having More Cash in Your Pocket and a Happier Life!”Consolidating Debt
to include our ever changing life style and careers mean consolidation is a great item to add in our possible option.

These options should allow us more personal cash and more personal peace and happiness and times with our familes.

]]> By: Anshul http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-24951 Anshul Wed, 29 Nov 2006 16:18:13 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-24951 Indeed an intriguing post. I dunno if it will be asking for too much but i was wondering if you would like to share the spreadsheet as well to give an insight of the model.... Indeed an intriguing post. I dunno if it will be asking for too much but i was wondering if you would like to share the spreadsheet as well to give an insight of the model….

]]> By: Bryan C. Fleming » Blog Archive » August 29th Blog Carnival http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-23145 Bryan C. Fleming » Blog Archive » August 29th Blog Carnival Tue, 24 Oct 2006 13:48:17 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-23145 [...] Simran Gill presents Personal Finance and Simulation Modelling posted at Simran Gill –> Article and URL Archive, saying, “Article on personal finance and modelling - hope it works” [...] [...] Simran Gill presents Personal Finance and Simulation Modelling posted at Simran Gill –> Article and URL Archive, saying, “Article on personal finance and modelling – hope it works” [...]

]]> By: FIRE Finance http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-22323 FIRE Finance Thu, 05 Oct 2006 14:58:40 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-22323 <strong>Round Up - Carnival of Personal Finance #63...</strong> This week's Carnival #63 of Personal Finance was hosted by 1stMillionAt33. It was a wonderful carnival of information sharing with around 50 quality posts. Our post Research - From Junk to Joy ! was published under the category Saving Tips. In the c.... Round Up – Carnival of Personal Finance #63…

This week’s Carnival #63 of Personal Finance was hosted by 1stMillionAt33. It was a wonderful carnival of information sharing with around 50 quality posts. Our post Research – From Junk to Joy ! was published under the category Saving Tips. In the c….

]]> By: Kurt http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-22060 Kurt Thu, 28 Sep 2006 03:41:02 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-22060 Excellent post. I did something similar with an eye more towards answering what the right level of volatility to target is given your saving and spending goals. I.e., assuming that accepting more market risk provides increasing returns, when does it makes sense to hold the market portfolio vs. skewing towards bonds (lower risk) or levering via LEAPS, margin, or high beta portfolios. My analysis is here: http://kurtjohnson.net/Interests/InvestmentRiskOptimization.htm As a sidenote, your return trajectories are a bit of a conundrum since there is some mean reversion; returns are not random from year to year and I expect that using the mathematical conversion of annual return volatility to convert to volatility per decade would really overstate volatility observed in past decades (multiply the annual return volatility by 10^.5). As a sidenote, I believe 10% annual stdev of returns is probably low; I expected a standard deviation closer to 20-25% for US equities. Using this larger number you may need to convert the model to a lognormal distribution to avoid drawing trials where the return from a normal distribution is Excellent post. I did something similar with an eye more towards answering what the right level of volatility to target is given your saving and spending goals. I.e., assuming that accepting more market risk provides increasing returns, when does it makes sense to hold the market portfolio vs. skewing towards bonds (lower risk) or levering via LEAPS, margin, or high beta portfolios.

My analysis is here: http://kurtjohnson.net/Interests/InvestmentRiskOptimization.htm

As a sidenote, your return trajectories are a bit of a conundrum since there is some mean reversion; returns are not random from year to year and I expect that using the mathematical conversion of annual return volatility to convert to volatility per decade would really overstate volatility observed in past decades (multiply the annual return volatility by 10^.5).

As a sidenote, I believe 10% annual stdev of returns is probably low; I expected a standard deviation closer to 20-25% for US equities. Using this larger number you may need to convert the model to a lognormal distribution to avoid drawing trials where the return from a normal distribution is

]]> By: frugal http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-21267 frugal Sat, 09 Sep 2006 02:39:03 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-21267 Simon, Definitely I am not saying that you have any modeling errors, and your model is certainly better than mine. I am merely saying that your inputs are probably not correct. Simon,
Definitely I am not saying that you have any modeling errors, and your model is certainly better than mine.
I am merely saying that your inputs are probably not correct.

]]> By: admin http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-21265 admin Sat, 09 Sep 2006 02:20:27 +0000 http://simran.crownpac.net/blog/2006/08/26/personal-finance-and-simulation-modelling/#comment-21265 Frugal, Because the portfolio return, initial size, Std Dev., and contributions are all inputs - its not a modelling error if the values I chose are different from what you would choose. It's up to the individual application to determine an appropriate return level, risk, and whether or not real estate (home) is included in the portfolio. The benefit of monte carlo is that it doesn't just give 'point' estimates for future worth - it's a way of evaluating risk. The model you've linked to is excellent, but it's hard to determine the likihood of achieving a specific return. Tax was excluded from the model because it depends on your holding period, use of tax-free investment plans (RRSP's in canada), tax-free bonds (muni's), country, tax bracket, tax changes, etc. That would be an extensive extension of the model, but a valuable one. Frugal,

Because the portfolio return, initial size, Std Dev., and contributions are all inputs – its not a modelling error if the values I chose are different from what you would choose. It’s up to the individual application to determine an appropriate return level, risk, and whether or not real estate (home) is included in the portfolio.

The benefit of monte carlo is that it doesn’t just give ‘point’ estimates for future worth – it’s a way of evaluating risk. The model you’ve linked to is excellent, but it’s hard to determine the likihood of achieving a specific return.

Tax was excluded from the model because it depends on your holding period, use of tax-free investment plans (RRSP’s in canada), tax-free bonds (muni’s), country, tax bracket, tax changes, etc. That would be an extensive extension of the model, but a valuable one.

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