What a percentile means
If the 10th percentile final value is $700,000, then 10% of simulated paths ended below $700,000 and 90% ended above it. If the median is $1,400,000, then half of the paths ended below that number and half ended above it. The percentile is not a confidence guarantee; it is a summary of the simulated paths produced from the assumptions.
Portfolio Modeler shows percentile bands at five-year checkpoints and includes the final year even when the projection period is not a multiple of five. For example, a 17-year projection should still show year 17 results instead of stopping at year 15.
Why the average and median can differ
The average, also called the mean, adds every simulated result together and divides by the number of simulations. The median is the middle result. Investment outcomes are often skewed because strong upside paths can pull the average higher than the median.
That difference is useful. If the average is much higher than the median, a few strong paths may be doing a lot of work. In that case, the median may better represent a typical path, while the average describes the arithmetic center of all outcomes.
Which percentile should you care about?
There is no single correct percentile for every decision. The useful number depends on the question. A conservative planner may care most about P10 and P25. Someone comparing upside potential may look at P75 and P90. Someone testing whether a goal is realistic may care more about the probability of crossing a specific target value by a certain year.
- P5 and P10 help show severe downside scenarios inside the simulation.
- P25 is a useful weaker-than-average planning range.
- P50, the median, is the central path.
- The mean shows the arithmetic average of all paths.
- P75, P90, and P95 show stronger outcomes and upside spread.
Comparing two portfolios
When comparing portfolios, avoid focusing only on the highest median final value. A portfolio with a higher median but much lower P10 may be harder to live with. A portfolio with a modest median but narrower downside range may be more practical for an investor who values stability.
Look at the width of the range between P10 and P90. A wider range means more uncertainty. That is not automatically bad, but it should be intentional. If the portfolio is concentrated in volatile assets, the chart should show a wider fan of outcomes. If the portfolio includes lower-volatility holdings, the fan may narrow, though upside may also be lower.
Goal odds and percentiles together
Goal odds answer a different question than percentiles. A percentile says where the distribution sits at a point in time. Goal odds say how often a simulated path reaches or exceeds a target value. Both are useful because a portfolio can have a strong median while still failing a high goal in many paths.
Use the percentile chart to understand the range, the histogram to understand the final-year distribution, and goal odds to understand whether the target is common, borderline, or rare within the assumptions.