The Real Estate Financial Planner™ software allows you to model your own investing strategy or see examples of previously created investing models.
Often, users will choose to model risk and the variability of returns by using Rules to add this variability and conduct multiple runs of the same
Scenario.
When we do multiple runs—sometimes hundreds or even thousands of runs—this is referred to as Monte Carlo.
Monte Carlo simulations allow us to summarize the results of a large number of runs of the
Scenario.
If we take the average of all the values generated by the Monte Carlo runs for a given month, we call that the
Expected Value (
EV) of the
Scenario for that month.
To be able to see the EV
Chart for a
Scenario, first you must have run
Monte Carlo on your
Scenario.
Then, from the Chart page, you need to click on
EV to be able to see the
Expected Value (or the average return for the
Monte Carlo runs) for that
Scenario.
So, EV charts are not really separate
Charts at all. They are an additional option on
Charts with
Monte Carlo.
If you think about it, you can toggle on the median line on the Chart which shows you the line where half of the
Monte Carlo run results are above and half are below. The
EV line is the average of all the values for that month.
Expected Value
If you’d like more information about using EV with the Real Estate Financial Planner™ software, check out the additional resources below: