Monte Carlo Simulation

This Monte Carlo simulation tool provides a means to test long term expected portfolio growth and portfolio survival based on withdrawals, e.g., testing whether the portfolio can sustain the planned withdrawals required for retirement or by an endowment fund. The following simulation models are supported for portfolio returns:

You can choose from several different withdrawal models including:

To simulate multiple stages such as career and retirement with detailed cashflow goals use the Financial Goals planning tool.

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Monte Carlo Simulation Results

Monte Carlo simulation results for 10000 portfolios with $1,000,000 initial portfolio balance using the normal distribution with 5.80% mean and 11.40% standard deviation for annual returns. The simulated inflation model used historical inflation with 3.94% mean and 1.31% standard deviation based on the Consumer Price Index (CPI-U) data from Jan 1972 to Dec 2018. The generated inflation samples were uncorrelated with simulated asset returns.
Save simulation model »

Summary Statistics

Summary Statistics
1st Percentile5th Percentile50th Percentile95th Percentile99th Percentile
Time Weighted Rate of Return (nominal)-3.11%-0.65%5.10%11.18%13.90%
Time Weighted Rate of Return (real)-7.22%-4.65%1.14%7.18%9.85%
Portfolio End Balance (nominal)$729,297$936,646$1,645,128$2,887,040$3,673,733
Portfolio End Balance (real)$474,564$623,036$1,120,487$2,000,326$2,557,268
Maximum Drawdown-43.99%-36.04%-20.02%-11.55%-9.36%
Safe Withdrawal Rate6.24%7.33%10.57%14.88%17.18%
Perpetual Withdrawal Rate0.00%0.00%1.13%6.70%8.96%
   
Notes on results:
  • Monte Carlo simulation uses historical data and thus assumes that the future will, to some extent, mimic the past. The actual future results may vary.
  • The probability of success is based on the number of simulations the portfolio survives with a positive end balance.
  • Maximum drawdown statistics are calculated from simulated monthly balances.
  • Safe withdrawal rate is the percentage of the original portfolio balance that can be withdrawn at the end of each year with inflation adjustment without the portfolio running out of money.
  • Perpetual withdrawal rate is the percentage of portfolio balance that can be withdrawn at the end of each year while retaining the inflation adjusted portfolio balance.
  • Taxes and transaction fees are not taken into account.
  • Past performance is not a guarantee of future returns. See Disclaimer and Terms of Use
  • Contributions and withdrawals are done at the end of each specified time period

Expected Annual Return

Expected Annual Return
Percentile1 Year3 Years5 Years10 Years
1st Percentile-18.26%-9.16%-6.13%-3.11%
5th Percentile-12.39%-5.23%-2.93%-0.65%
50th Percentile5.10%5.17%5.07%5.10%
95th Percentile24.77%16.35%13.56%11.18%
99th Percentile33.94%21.33%17.67%13.90%

Annual Return Probabilities

Annual Return Probabilities
Return1 Year3 Years5 Years10 Years
>= 0.00%67.70%78.62%84.67%92.77%
>= 2.50%59.22%65.49%69.92%77.30%
>= 5.00%50.36%51.03%50.69%51.19%
>= 7.50%41.73%35.80%31.11%25.42%
>= 10.00%33.68%23.24%16.41%9.15%
>= 12.50%26.16%13.50%7.18%2.32%

Loss Probabilities

Loss Probabilities
LossWithin Time PeriodEnd of Time Period
>= 2.50%68.12%6.23%
>= 5.00%54.40%5.42%
>= 7.50%43.26%4.64%
>= 10.00%34.00%4.00%
>= 12.50%26.51%3.40%
>= 15.00%20.14%2.87%
>= 17.50%15.39%2.39%
>= 20.00%11.68%1.98%
>= 22.50%8.62%1.60%
>= 25.00%6.24%1.22%
>= 27.50%4.70%0.93%
>= 30.00%3.41%0.74%
>= 32.50%2.29%0.56%
>= 35.00%1.51%0.34%
>= 37.50%0.97%0.27%
>= 40.00%0.57%0.13%
Loss is measured against the original portfolio balance.