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Term

Monte Carlo simulation

A technique that models thousands of possible outcomes to estimate a range of results.

A Monte Carlo simulation runs many randomised paths to show the distribution of outcomes a portfolio might experience, rather than a single forecast. It is a way to reason about uncertainty honestly.

A Monte Carlo simulation is valuable less for precision than for the humility it encourages. By showing a fan of possible outcomes rather than a single line, it makes uncertainty visible and helps a family judge whether a plan survives not just the expected path but the unlucky ones.

Related terms

Modern portfolio theory The framework for building portfolios by balancing risk and return through diversification. Private credit Lending to companies outside the public bond markets. Private equity Investment in companies that are not listed on a public exchange. Private Markets Investments not traded on public exchanges, such as private equity and credit. Pseudonymisation Replacing identifying data with tokens so a person can't be identified without a separate key. Rebalancing Trading a portfolio back toward its target allocation as markets move it off course.

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