I am thinking of rebalancing my investment portfolio and I've become increasingly interested in evaluating life as a range of possibilities (distribution) instead of a fixed number (average).
I'm not a professional investor and I've yet to find a professional for guidance that seems to think in these terms - so I'm thinking of tinkering around with it myself. I don't want to be active, I'd like to buy and hold some strategy for a fairly long period of time as a long term investment. A popular view is: assume an investment of 10K on X date, what would the terminal value be on Y date. My concerns with this are: 1. What is the right X date? 2. What is the right Y date? 3. Why do I have any reason to believe that the future will be like the span between those dates? I'm thinking of running a series of simulations that will create a distribution of potential gains and then I can compare the distributions across the different strategies. Example simulations: 1. Evaluate the performance over a 5 year horizon. Pick a rolling start date between X and Y for each 5 year interval and calculate the returns. (e.g. 1/1/2010->1/1/2015, 1/2/2010->1/2/2015, 1/3/2000->1/3/2015). 2. Repeat for each 5 year span possible (e.g. 1/1/2000->1/1/2005, 1/1/2010->1/1/2015... and all in between ) 3. Repeat for 3, 5, 10, 15 year spans 4. Instead of shifting the dates, sample with replacement from the spans for each of the above (e.g. between 1/1/2010 and 1/1/2015, the dates could be 1/1/2010, 1/2/2010, 1/1/2010) If these different simulations were plotted on a histogram, I am thinking something might pop out. Questions: 1. Has anyone done anything like this in J? 2. Are there any investors (armchair or professional) that would care to opine on the usefulness of this analysis? Thanks, Joe ---------------------------------------------------------------------- For information about J forums see http://www.jsoftware.com/forums.htm
