•‘Bootstrapping’ – which simulates future investment returns by assuming that the future will be similar to past.
•For example, if we want to simulate the stock price of GE in one year, assumption is made that each month’s percentage change in price is equally likely to be percentage changes for the previous 60 months.
•This approach allows to generate thousands of scenarios for the future value of your investments easily.
•In addition, bootstrapping can be easily adjusted to reflect a view that future returns on investments will be less or more favourable than in the recent past.
•After generating future scenarios for investment returns, use MS Excel Solver to work out the asset allocation problem – how to allocate investments to attain the level of expected return but with minimum risk
Example can be found at