Test thousands of market scenarios to see how likely your investment plan is to succeed. Make confident decisions with data-driven insights.
Goal you want to achieve
Average expected return
Standard deviation of returns
Monte Carlo simulation is a mathematical technique that runs thousands of random scenarios to predict investment outcomes. It reflects the reality that markets don't move in straight lines.
It's much more realistic than simply assuming "7% annual returns." Real markets are volatile and unpredictable.
Account for market volatility
See worst-case scenarios
Make informed decisions
π° Key Point: Monte Carlo answers "what if" questions. "What if the market crashes?", "What if inflation rises?" Test various scenarios before they happen.
Traditional calculators assume steady 7% returns every year:
Monte Carlo analysis of the same conditions gives much more realistic results:
Monte Carlo shows you the range of possible outcomes, not just one number. You can see your chances of success and prepare for different scenarios. This helps you make better decisions about how much to save and how to invest.
High growth potential
Moderate risk & return
Lower risk, stable
90% Stocks
60% Stocks
30% Stocks
These figures are based on historical data and estimates. Actual returns may vary, especially in the short term with high volatility. Monte Carlo simulation accounts for this uncertainty.
Monte Carlo simulation is important because market crashes actually happen. Looking at major historical crashes:
S&P 500 dropped 57% over 17 months
NASDAQ fell 78% over 2.5 years
35% drop in just 5 weeks
89% decline over 3 years
Despite these crashes, markets have always recovered and reached new highs. Monte Carlo factors in both crashes and recoveries:
Full recovery by 2013, new highs by 2014
Full recovery by 2007, despite long bear market
Fastest recovery ever - new highs by August
S&P 500 averaged 10% annually despite all crashes
Monte Carlo simulation includes these crashes in its scenarios. So it can answer "What if a crash happens right after I start investing?"
Don't just look at the 50% probability outcome. Consider the full range of possibilities, especially worst-case scenarios.
Early losses hurt more than later ones. A crash in your first few years of retirement can be devastating.
Don't assume 12% returns or ignore inflation. Use conservative, realistic inputs for better planning.
Investment fees compound over time. A 1% annual fee can reduce your final portfolio by 20-25%.
Your situation changes over time. Re-run simulations annually or when major life events occur.
Monte Carlo already factored in crashes. Stick to your plan instead of making emotional decisions.
Don't leave it to chance. Use Monte Carlo simulation to test thousands of market scenarios and make investment decisions with confidence.