Portfolio Wealth Simulator

The Purpose (Why?)

To understand the range of possible future portfolio outcomes ("cone of uncertainty") due to market volatility and the specific order of investment returns. It demonstrates how "unlucky" timing (early losses) can severely impact a portfolio even if the average return is good. (Note: Simulations use inflation-adjusted "Real Dollars")

How it Works

Select a Mode (Retirement or Savings). Enter your Initial Balance, assumed Return/Volatility parameters, and either a Withdrawal Rate (Retirement) or Annual Contribution + Growth (Savings).

Case Studies

See how this calculator was used in these foundational lessons:

ALGORITHMIC_NOTE: REAL_DOLLARS

Simulations use "Real Dollars" (inflation-adjusted). This means a 0% return maintains purchasing power, while positive returns approximate growth above inflation.

Input Specifications

PARAMETER	DETAILS
Retirement Mode
Initial Balance	Starting portfolio value. EXAMPLE: $1,000,000
Real Return	Average annual return (inflation-adjusted). EXAMPLE: 5.8%
Stdev	Annual standard deviation (volatility). EXAMPLE: 6.1%
Safe Withdrawal Rate	Percentage of initial portfolio withdrawn annually. EXAMPLE: 5.0%
Annual Expense	Annual percentage fee or expense ratio deducted from the portfolio. EXAMPLE: 0.0%
Duration	Length of the simulation in years. EXAMPLE: 30 Years
Savings Mode
Initial Balance	Starting portfolio value. EXAMPLE: $0
Real Return	Average annual return (inflation-adjusted). EXAMPLE: 7.0%
Stdev	Annual standard deviation (volatility). EXAMPLE: 17.0%
Annual Savings	Base annual contribution amount. EXAMPLE: $12,000
Annual Savings Growth	Annual percentage increase in savings contributions. EXAMPLE: 3.0%
Annual Expense	Annual percentage fee or expense ratio deducted from the portfolio. EXAMPLE: 1.0%
Duration	Length of the simulation in years. EXAMPLE: 30 Years

Benchmark Values

50/50 Portfolio (Stocks/Bonds)

R: 5.8% | σ: 6.1%
100% Stocks (S&P 500)

R: 7.0% | σ: 17.0%