Monte Carlo Simulation & Stress Testing
The ultimate guide to reading and interpreting our probabilistic engines. Understand worst-case scenarios, withdrawal safety, and percentile projections.
1. How to Read the Projections
Every probabilistic simulation runs thousands of potential futures (paths). Instead of giving you a single "average" return, we show you the distribution of all possible outcomes.
Interactive Sample: 30-Year Wealth Projection across 10th, 50th, and 90th percentile bounds.
10th Percentile (P10)
The Pessimistic Case. 90% of our simulated futures performed better than this number. Use P10 to ask yourself: "Can I survive if the market crashes and stays flat for a decade?"
50th Percentile (P50)
The Expected Case. The median outcome. Half of the simulated futures were worse, half were better. Consider this the "planning baseline".
90th Percentile (P90)
The Optimistic Case. Only 10% of futures performed better than this. This represents an incredible bull run. Do not rely on P90 for financial safety.
2. The Three Simulation Engines
StressTest.pro offers three distinct mathematical models for generating random futures. Knowing which to use will drastically improve your analysis.
Custom Monte Carlo (Normal Distribution)
Uses standard Geometric Brownian Motion based on your custom inputs for average return and volatility. It assumes a "perfect bell curve" of outcomes.
Historical Bootstrap (Fat Tails)
Instead of generating random artificial numbers, this model pulls thousands of actual past daily returns out of a hat. This perfectly captures real-world "Fat Tails" — the violent, unexpected crashes and explosive rallies that true math formulas miss.
Smart Factor Projection
Our proprietary institutional-grade model. It maps your exact portfolio to 19 global macroeconomic variables (Interest Rates, Energy, Growth, Emerging Markets) and simulates 10,000 correlated regime paths based on current economic trends.
3. Stress Testing (Worst Case Scenarios)
Black Swan Scenarios
Surviving 2008 and COVID-19.
This isn't a random simulation. A Black Swan test applies the exact sequence of historical pain from a specific crisis onto your current portfolio. It shows your 'Max Drawdown' and your absolute 'Trough Value' (the lowest dollar amount your portfolio hit before recovering). Ask yourself: Will I panic sell if my account drops to this Trough Value?
Factor Shocks
Day-1 Impact of Macro Events.
What happens if Interest Rates instantly spike by 2% tomorrow? Or if the S&P 500 crashes 20%? The Factor Shock tool calculates the instantaneous Day-1 sensitivity of your portfolio to these specific macroeconomic triggers using Beta and factor covariance.
Supported Historical Shocks
4. F.I.R.E. & Retirement
Sequence of Returns Risk in Decumulation
When you are retired (or FIRE), you are withdrawing money every year (negative cashflow). If the market crashes 30% in your first year of retirement, you are forced to sell assets at rock-bottom prices. The market might recover later, but your portfolio won't, because those shares are gone forever.
Goal Success Rate
The percentage of the 10,000 simulations where your portfolio did NOT hit $0 before the end of your horizon. A 95% success rate is the gold standard for retirement safety.
Safe Withdrawal Rate (SWR)
Usually calculated as Initial Annual Withdrawal split by Initial Capital (e.g., $40k / $1M = 4.0%). The FIRE simulation tells you if your specific SWR works for your specific asset mix.
Simulate 10,000 Futures Now
Put the math to work. Configure a Monte Carlo or Historical Bootstrap projection using your exact parameters.
Start Monte Carlo Simulation