Measure
Monte Carlo simulation
Definition
Estimating a distribution of outcomes by simulating many return paths.
How to read it
It replaces a single historical sequence with thousands of possible ones, showing the spread of outcomes rather than one answer.
What it does not tell you
The output is a restatement of the input assumptions. Draws from a normal distribution will understate crashes no matter how many paths are run, and a precise-looking success rate expresses confidence in a model rather than in the world.
Applied in 4 articles
4- Monte Carlo vs the 4% Rule: Simulating Retirement Withdrawals Instead of Assuming Them
- The Master Class: How to Use Claude (Anthropic) to Backtest Your Own ETF Strategy
- "The Curse of Sequence Risk" – Protecting Your 30-Year Plan from a Pre-Retirement Crash
- Re-evaluating the 4% Rule: Sequence Risk, Yield, and Dynamic Withdrawal in 2026
Every figure computed with this measure on this site follows the conventions set out in the methodology. All measures →