Question 1

What is a Monte Carlo investment simulator?

Accepted Answer

A Monte Carlo investment simulator runs thousands of possible future scenarios for your portfolio by randomly sampling investment returns. Instead of showing one average growth line, it shows the full range of outcomes — from worst case to best case — helping you understand the real risk and reward of different asset allocations.

Question 2

What is the difference between statistical and historical bootstrap Monte Carlo simulation?

Accepted Answer

Statistical Monte Carlo draws random returns from a normal distribution based on historical averages and standard deviations. Historical bootstrap randomly samples actual annual returns from a chosen time period, preserving real-world fat tails like the 2008 crash or 1933 recovery that statistical models can underestimate.

Question 3

What are common asset allocations by time horizon?

Accepted Answer

Common industry rules of thumb vary by time horizon. With 30+ years to retirement, many investors choose aggressive to growth allocations (80-90% stocks). With 15-30 years, growth or moderate (60-75% stocks) is common. With 5-15 years, moderate allocations (40-60% stocks) are typical. In retirement, conservative allocations (25-40% stocks, 40-50% bonds, 10-20% cash) are widely used. These are general educational examples, not personalized recommendations — consult a qualified financial advisor for guidance specific to your situation.

Question 4

How does inflation affect Monte Carlo investment projections?

Accepted Answer

When inflation adjustment is enabled, inflation is simulated as a random variable each year (not a fixed deduction), and all portfolio values are converted to today's purchasing power. This widens the distribution of outcomes because a bad simulation can combine poor market returns with high inflation — showing the realistic worst case for your retirement savings.

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What could your portfolio actually look like?

Monte Carlo portfolio simulator — compare asset allocations, model inflation, and stress-test your retirement plan