4. We take that bell curve and use it to randomly pick how much house prices change each year. 
   1. Big booms and crashes can happen, but most years are pretty average – just like the bell curve shows. 
   2. Each simulation mixes up those years in a new order, and we do this over and over to see all the ways things could go.
   3. All up we run 30,000 simulations of what could happen. 
5. Then we ask: out of all those 30,000 simulations, what happens to your wealth most of the time?

That’s how we calculate how wide the fan is, and this gives you a sense of where and how your property value might change.

Now, if your head is spinning, that’s OK. Here’s a video explaining exactly how the Monte Carlo simulation works.

How likely is it I will hit my goal?

When we create these simulations we can also ask, “How likely is it that you hit your wealth goal?” 

And we show you that within your Wealth Plan.

It might be 0%, 5%, 10%, or 50%+. That number represents how many of the 30,000 simulations reached (or exceeded) your goal.

For example, let’s say your goal is to have $2.5 million in assets. 

If, in 50% of the simulations, your plan reaches that number (or higher), your plan will show a 50% chance of success.

That means:

• Half the time, your investments will do better than you thought 
• Half the time, they’ll do worse

This is exactly what you’d expect if you use historic average. For instance, if house prices go up (on average) 7% a year. 

Half the time your return will be better than that; half the time your return will be worse than that.

That’s the middle, so if you assume house prices rise 7% a year, even if history repeats there’s only a 50% chance that you get at least that amount of growth. That’s not good or bad, it’s just the math.

What chance should I aim for?

Let’s get real for a second. How are you going to feel when you see on your Wealth Plan: “You have a 50% chance of hitting your goal.”

“Only 50%? Yikes that’s bad.”

It’s good that you’re thinking that … because now you’re thinking about risk in a sophisticated way. 

If you just drew a straight line, you’re talking a 50/50 chance that you exactly hit your goals … without realising it. 

Because what that 50/50 chance is saying is: “If the market performs as it has in the past – you’re on track for your goals.”

That’s not failure; that’s a benchmark. And now you know that you can try to get that percentage up. But if that 50/50 chance still feels too uncertain, think of it as saying:

• You have a 55% chance of being within 10% of your target (for example)
• Or, you have a 60%+ chance of being within 20% (for example)

Suddenly, that 50% doesn’t sound so scary. You’re in the ballpark — or as we say, within cooee of where you want to be.

And investing in your future will generally give you a better chance of hitting your goals than doing nothing at all.

How can I increase my chance of success?

Bear in mind, when you see this “chance of hitting your goal” … it’s not that our strategies at Opes are less certain than other strategies. 

All investing has uncertainty.

But we don’t want to hide that uncertainty behind the historical average. 

We’d rather show you the risks upfront, so we can work together to manage it.

That said, two main levers you can pull to lift the chances of hitting your financial goal are:

1. Invest more. If you want to move from a 50% chance to a 66% chance (what we generally recommend), you’ll probably need to invest more money. That could be in property, KiwiSaver or other assets.

Let’s say you want $1 million of wealth. If you aim for $1.5 million of wealth, you’ll have a really high chance hitting your $1 million goal. 

So if you aim high, even if the market doesn’t perform as well, you’ll have a good chance of hitting your goal.

2. Be realistic about your plan. Maybe your goals are very ambitious right now. If you’re early in your journey and only own one property, your plan might show a 3% chance of hitting a $4 million goal. 

That’s not because your investments are bad – it’s because you haven’t added enough to the plan yet. So add more investments into your plan and that will increase the chance of hitting your goal.

Should I aim for 100% success?

You might ask, “Why can’t I have a 100% chance of hitting my financial goal?” 

Wouldn’t that be nice? 100% certainty that your investment journey will be a success. You’ll hit your goal and you’ll never have to worry again.

Here’s why that’s often not a good idea, because there’s always a chance that the market has a few bad years in a row.  

So, the only way to achieve 100% success is to invest in assets that never go up or down. That means stuffing money under your mattress. 

And while that is technically possible, if you take no risk you get no return and you need to save yourself rich. 

If you wanted to save $1 million over 20 years, you’d need to save $961 a week. 

If you wanted a 66% chance that you’d hit exactly $1 million or more investing in shares you’d only need to invest $510 a week ($450 less). 

Why does all this matter?

Now, if your brain is spinning ... don’t worry. Not everybody needs to understand the mechanics of how it works to get the benefit of the final result. 

We are just explaining this to you because there are some Opes investors who are extremely analytical and want to know how it all works. 

If you’re not that type of person, all we want you to know is we have actually thought about ALL the possibilities. 

We’re thinking about what happens if house prices don’t rise 5% a year. And we’re putting the numbers into your hands so you can make a good investment decision. 

So, you don’t need to understand every technical detail, but here’s what we want you to take away:

• Your plan is based on some pretty advanced modelling
• The future isn’t fixed. And that’s OK – we plan for the range, not just the line
• You’re in control. If you want to lift your chance of success, you can adjust your plan

Yes, this stuff can be nerdy, but it’s also empowering.

Because once you understand the risk, you can manage it — and make smarter, more confident financial decisions.

That’s based on our Monte Carlo modelling. And we want you to know about those possibilities. Not to scare you — but so we can plan around them.