There's no need to install into the sim. The installer uses a shared location so, if you have several simulators installed (FSX, P3D3, P3D4), it won't unnecessarily triple the hard drive space used.
So, you are not supposed to point out the simulator folder. You are only asking to confirm or not the default installation folder that, unless you don't have enough space on C:, it's the most sensible choice.
If you don't have enough space on C:, you can choose another drive, like D:, and it will install into D:\Addon Manager, and it's perfectly fine.
Also, if you already have installed in P3D3, and you installed "into" the simulator, it's best if you uninstall everything from FSDT, then reintall everything using only the latest installers, so you can have everything running under both simulators, but installed in the dedicated Addon Manager folder, outside the sim, and with no wasted space.