At Ellevest Digital or Premium, we use Monte Carlo simulation - a forward looking, computer-based calculation - to determine how your investment plan would perform under hundreds of different economic scenarios. In 70% of those scenarios, you are projected to achieve your goal or better, whether you invest in a core or Ellevest Impact Portfolio at Ellevest Digital/Premium. The other 30% of the time, you are projected to reach an amount less than your goal.
Why do you select a forecast of 70%?
We believe that a 70% likelihood provides you with a comfortable level of confidence that you will be able to achieve your financial goals with your investment plan. Some other digital advisors may show higher forecasts but those forecasts only have a 50% estimated chance of achievement... so “average” or “slightly better than average”. At Ellevest Digital/Premium, we want to help you achieve your goals with a higher level of confidence.
What if I adjust my risk?
Increasing your portfolio risk may lead to higher return outcomes, but at the cost of greater risk. That means that if markets do poorly, you might end up with much less money and if markets do very well, you may earn much more. Decreasing your portfolio risk of your portfolio means there will potentially be less variation in your possible outcomes. Your portfolio may return less if markets do very well, but also lose less if markets do poorly.
Why not always increase my risk if it has the potential of more money?
Increasing your portfolio risk has the potential for increasing your portfolio returns, but that comes at the cost of incurring more risk. That means that your potential for returns is higher, but so is your potential for losses.