Monte Carlo Simulation

This online 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 available historical returns data from Jan 1972 to Dec 2016. The historical return for the selected portfolio for this period was 10.14% mean return (9.55% CAGR) with 10.04% standard deviation of annual returns. The simulation results are based on generated nominal returns and specified inflation adjusted withdrawals ($45,000 per year). The simulated inflation model used historical inflation with 4.02% mean and 1.32% standard deviation based on the Consumer Price Index (CPI-U) data from Jan 1972 to Dec 2016. The generated inflation samples were correlated with simulated asset returns based on historical correlations. The simulation time period was constrained by the available history for US Stock Market [Jan 1972 - Oct 2017].
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Portfolio Allocation

Asset Class Allocation
Save portfolio »
US Stock Market 60.00%
10-year Treasury 40.00%

Summary Statistics

Summary Statistics
10th Percentile25th Percentile50th Percentile75th Percentile90th Percentile
8885 portfolios out of 10000 simulated portfolios (88.85%) survived all withdrawals.
Portfolio End Balance (nominal)$0.00$1,817,369$4,833,043$9,477,650$15,503,532
Portfolio End Balance (inflation adjusted)$0.00$538,189$1,499,254$3,036,718$5,049,689
Maximum Drawdown-100.00%-40.41%-28.31%-22.56%-19.36%
Maximum Drawdown Excluding Cashflows-30.97%-25.59%-21.96%-19.36%-18.01%
   
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.
  • The results assume annual rebalancing of portfolio assets at the end of each year. Taxes and transaction fees are not taken into account.
  • Past performance is not a guarantee of future returns and data and other errors may exist. See Disclaimer and Terms of Use
  • Contributions and withdrawals are done at the end of each specified time period

Simulated Assets - Correlations and Returns

Simulated Assets
NameUS Stock Market10-year TreasuryInflationExpected Annual ReturnAnnualized Volatility
Asset correlations and return vs. risk statistics are based on monthly returns from Jan 1972 to Dec 2016
US Stock Market1.000.06-0.0811.52%15.53%
10-year Treasury0.061.00-0.157.67%8.24%
Inflation-0.08-0.151.004.02%1.32%