Portfolio Simulator
Published by Radif Partners · Updated
The simulator projects the value of an investment from four inputs, a starting capital, a periodic contribution, an average annual return and a duration, and it applies compounding period by period rather than a simple multiplication, which is the only way the effect of regular contributions appears. It also deducts the fund's ongoing charges from the gross return, because over twenty years those are what separate two otherwise identical investments: one point of annual fees costs roughly a quarter of the final capital over thirty years. The projection shows the sum of contributions and the part produced by return separately, a useful distinction because it shows the year from which return overtakes saving, a moment that arrives later than people expect and that explains why the early years feel disappointing.
Frequently asked questions
How does the ETF simulator work?
The simulator projects your potential portfolio value based on monthly investments, expected return, investment duration, TER, and broker fees. It uses compound interest calculations to show year-by-year growth. The simulation projects a constant average return, which no market delivers: it shows the arithmetic of compounding and of charges, not a forecast. The order of good and bad years, taxes and your own behaviour in a fall matter at least as much as the average.
What annual return should I use?
A common assumption is 7-8% for global equity ETFs (MSCI World historical average). For bonds, use 2-4%. These are nominal returns before inflation. Past performance does not guarantee future results. The simulation projects a constant average return, which no market delivers: it shows the arithmetic of compounding and of charges, not a forecast. The order of good and bad years, taxes and your own behaviour in a fall matter at least as much as the average.
Does the simulator account for inflation?
The basic mode shows nominal returns. Enable Monte Carlo mode to add an inflation adjustment. With 2% inflation, a 7% nominal return becomes approximately 5% real return. The simulation projects a constant average return, which no market delivers: it shows the arithmetic of compounding and of charges, not a forecast. The order of good and bad years, taxes and your own behaviour in a fall matter at least as much as the average.
What is the impact of TER on long-term returns?
Even small TER differences compound significantly. Over 30 years, a 0.20% TER vs 0.50% TER on a 200 EUR/month investment can mean 10,000+ EUR difference in final portfolio value. The simulation projects a constant average return, which no market delivers: it shows the arithmetic of compounding and of charges, not a forecast. The order of good and bad years, taxes and your own behaviour in a fall matter at least as much as the average.
Should I include broker fees?
If your broker charges per transaction, enter the monthly fee equivalent. Many modern brokers (Trade Republic, BUX Zero) offer free ETF savings plans, making this cost zero. The simulation projects a constant average return, which no market delivers: it shows the arithmetic of compounding and of charges, not a forecast. The order of good and bad years, taxes and your own behaviour in a fall matter at least as much as the average.
Why an average return never happens
No market returns seven per cent every year: it returns thirty, then loses twenty, then returns ten. The final result of a volatile sequence is lower than that of a constant return with the same arithmetic mean, because a loss is recovered at a higher percentage than it cost. The projection should therefore be read as a central path, not a promise, and the order of good and bad years matters as much as their average once withdrawals are planned.
What the projection leaves out
It contains neither inflation, unless you enter a real return already net of it, nor tax, which depends on your country and your wrapper, nor your broker's charges, nor the spread between buying and selling price paid on every order. On small monthly contributions those dealing costs can exceed the fund's own charges, and they are therefore worth checking before settling on a frequency.