Asset allocation tools and Monte Carlo simulators are available through broker-dealers and online services.
You may wish to construct your own asset allocation, but there are asset allocation programs available which can take a lot of the uncertainty out of the process. The most famous method for analyzing and testing an allocation involves the so-called Monte Carlo simulation.
This simulator helps you determine what would have happened with your portfolio if you were invested according to a particular mix of assets. Three main parameters you should consider for each asset class are: the asset’s historical performance, its volatility, and its correlation to other asset classes.
An investor would be wise to remember that the appropriate allocation will also depend on a person’s time horizon, risk tolerance, and objectives.
A Monte Carlo will crunch the numbers and show you which asset classes and regions you are gaining exposure to, among other things, but it will not lend much help with time horizon, income needs, tax considerations, and so forth.
What is an Asset Mix?
What are Some Strategies for Diversifying a Portfolio?