← Glossary
Monte Carlo simulation
Rather than compounding one assumed return every year, a Monte Carlo simulation runs many paths — this product samples from historical annual returns with replacement, rather than a theoretical distribution — picking a different sampled return for each path, each year. The result is a spread of possible ending balances rather than one number, reported as p10/p50/p90 percentile bands, which is a more honest picture of uncertainty than a single deterministic projection.
This explains what monte carlo simulation measures. It isn't investment advice — see the disclaimer.