Are all Monte Carlo planning tools basically the same?
The answer to this is a resounding NO! While many articles about Monte Carlo planning tools discuss these simulations as though they were generic, different models will produce different results. Some of the other available commercial tools (aside from Quantext Monte Carlo tools) use what is called Style Analysis, which means that they do not explicitly model the individual components of your portfolio. Style Analysis assume that the return on a mutual fund or any other portfolio can be largely described by attributing the variations in return on that fund or portfolio in various measures to a set of ‘indices.’ In a Monte Carlo simulation, this means that you actually simulate a small set of indices and then describe the investor’s portfolio as being made up of a combination of these indices in various weights. This approach often works quite well for analyzing a portfolio of mutual funds but is not well suited for analyzing a portfolio of individual stocks. There is a very good review
