Future Lab & Monte Carlo
How Luna uses thousands of simulated scenarios to project your financial future and calculate the probability of reaching your goals.
What is a Monte Carlo Simulation?
A Monte Carlo simulation is a mathematical technique that uses random sampling to understand the probability of different outcomes. Named after the famous casino in Monaco, it's the same methodology used by financial advisors, pension funds, and investment firms to model uncertainty.
Instead of predicting a single future (which is impossible), Monte Carlo simulations generate thousands of possible futures based on historical patterns, randomness, and your specific inputs. This gives you a probability distribution of outcomes rather than a false certainty.
How Future Lab Uses Monte Carlo
When you set up a goal in Future Lab, Luna runs 1,000 simulations of your financial future. Each simulation considers:
Income Variability
Your income may fluctuate due to bonuses, job changes, or economic conditions. Each simulation applies random variations within historical patterns.
Market Returns
Investment returns are inherently unpredictable. We model market volatility using historical return distributions, including rare but impactful events.
Spending Patterns
Your actual spending varies month-to-month. Simulations account for this natural variability rather than assuming perfect consistency.
Inflation
The purchasing power of money changes over time. Each simulation applies realistic inflation scenarios to both your savings and future expenses.
Understanding Your Success Rate
After running 1,000 simulations, Luna counts how many scenarios achieved your goal. If 780 out of 1,000 simulations succeeded, your success rate is 78%.
90%+
Very High Confidence
70-89%
Good Trajectory
<70%
Consider Adjustments
A 78% success rate doesn't mean you have a 78% chance of success—it means that in 78% of the simulated scenarios, given the range of possible outcomes, you achieved your goal. This is more nuanced and honest than a single-point prediction.
The Projection Range
Future Lab shows you three scenarios from the simulation results:
Planning for the conservative scenario while hoping for the optimistic one is a prudent approach to financial goal-setting.
Improving Your Success Rate
If your success rate is lower than you'd like, Future Lab lets you experiment with different scenarios:
Increase contributions — Even small increases compound significantly over time
Extend your timeline — More time allows for recovery from market downturns
Reduce the goal amount — A smaller target is easier to hit with high confidence
Adjust risk tolerance — Different investment strategies affect the range of outcomes
Important: The projections shown in Future Lab are hypothetical and based on the information you've entered. They are not predictions of actual performance and should not be considered financial advice. All investing involves risk, including the potential loss of principal. Past performance does not guarantee future results. Consult a qualified financial advisor before making investment decisions.