Intelligence Walkthrough

Monte Carlo Projections

Run 10,000-path simulations to model your financial future. See probability distributions instead of single-line projections.

001
Overview

What are Monte Carlo Simulations?

Monte Carlo simulations model thousands of possible futures for your portfolio by randomly sampling returns within historical ranges. Instead of a single straight line (which assumes constant 7% growth), you get a fan chart showing best-case, worst-case, and median outcomes. This accounts for sequence-of-returns risk—the reality that market timing matters, especially in early retirement.

002
Step by Step

Step-by-Step Guide

1. Connect Your Brokerage

Monte Carlo requires brokerage data. Navigate to Holdings → Accounts and connect via SnapTrade (Pro feature).

2. Create a Simulation

Navigate to Intelligence → Projection and click “New Simulation.”

  • Name: e.g., “Retirement at 65,” “Early Retirement Scenario”
  • Time Horizon: Years to project (typically 20-40 for retirement planning)
  • Sampling Method: Lognormal (recommended—matches real market behavior)
  • Inflation Preset: Historical Average (3.2%), or choose High/Low/None
  • Account Selection: Choose which accounts to include (toggle each on/off)

3. Interpret Results

The simulation runs 10,000 paths and shows a fan chart with percentiles.

  • Median (50th percentile): The middle outcome—half of paths do better, half worse
  • 90th percentile: Optimistic case—only 10% of paths exceed this
  • 10th percentile: Pessimistic case—90% of paths do better than this
  • Toggle between Nominal Dollars (face value) and Real Dollars (inflation-adjusted)
  • The shaded area shows the range of probable outcomes

4. Edit and Compare

Click the three-dot menu on any simulation to edit parameters or delete.

  • Run multiple simulations with different assumptions (e.g., retire at 60 vs 65)
  • Compare scenarios side-by-side on the Intelligence landing page
  • Asset-allocation-aware returns: the engine reads your actual holdings (stocks, bonds, cash) and samples accordingly
003
Pro Tips

Pro Tips

  • •Use lognormal sampling: It's the only method that models realistic market skew (small gains are common, huge losses are rare).
  • •Focus on the 10th percentile: If you can survive the worst 10% of outcomes, you're well-prepared for volatility.
  • •Rerun simulations quarterly: As your portfolio grows and market conditions change, update your projections to stay aligned with reality.

Ready to Get Started?

Join Rikdom and start running advanced portfolio simulations.

Start Your Free TrialBack to All Guides