Investment simulations possible?

shicky

Hi everyone,

I'm wondering is there somewhere I can easily simulate two or more competing investments over a period of time? i.e. have LS 100 versus my DIY selection of three funds over the last year for example?

Thank you

masonic

http://www.trustnet.com/Tools/Portfolio/PortfolioHome.aspx

Unfortunately, that one only works looking backwards. If anyone knows of one that looks into the future, I'd love to know

shicky

thank you very much masonic

TakeCareOfThePennies_2

shicky,

The word you are looking for to help your searches is backtesting.

Yes you can backtest investments and there are tools out there that can do it.

As for whether backtesting is effective and worthwhile, well, there are two distinct camps in that debate.

shicky

Thanks TakeCareOfThePennies,

I of course realise the key here is PAST performance rather than future. I did find this useful and interesting though as I learned that my own mix didnt beat LS100 which I found odd/poor!

TakeCareOfThePennies_2

shicky's school report .... "must do better next term"

But yes, I guess it might be an interesting way for you to see if one fund dragged the rest down ?

Borrowedtune

It might be worth mentioning that you can do forward-looking simulations on portfolios (and any other kind of financial model) too, but you need the right software.


One example is XLSim, developed by a guy called Sam Savage who is a professor at Stanford University. It's got all the core simulation functionality and has the great advantage that it's free to download. Basically it provides add-ins to MXExcel that allows you to enter probability distributions into spreadsheets (rather than data entries) so you can model risk and uncertainty and their impact on any results you are interested in.


There are also products such as CrystalBall and @Risk, and these have additional functionality but they can be expensive (@Risk was around £1,500 when I last checked).