Wrote a tiny (bad, wrongly weighed, purely hypothetical, bogus probability distribution) investment portfolio outcome simulator. Monte Carloed my current portfolio and a hypothetical big-companies-doing-well portfolio. Results were quite fun in the managing expectations -way.
Current portfolio results: Most likely scenario: down 30%. Average return: up 6% / up 2x (depending on my level of optimism). Minimum outcome out of 5000 runs: down 90%. Maximum outcome: up 12x. 1% of outcomes returned 10x+ and 20% of outcomes returned 4x+.
As you might imagine, the current portfolio is about "this company is growing fast, well-managed, high on cash, no debt, seems 80% undervalued for some reason" and "oh this company is mired in debt, in crashing economy, with sales tanking, lawsuits, has a big asset of defaulted debt, fraudulent former management, stock price down 99.8% in 3 years, sounds like a winner to me!" and "drilling for oil under the sea, that's the life for me (oil prices tank, wahaha, so does the stock price)". Meaning, high volatility, high potential upside.
The big-companies portfolio simulation came out a bit differently: Most likely outcome was 4% up, average outcome 30% up. Minimum outcome 30% down, maximum outcome 2x up. Good for value preservation in the long-term, but no chance of (quick) big wins. Still, by weighing the portfolio a bit differently, I did manage to up the max to 5x up, at the expense of making the most likely outcome be 4% down.
I don't place much trust in these simulations, but will now brace for the likely 30% loss and plan to survive the 90% loss. And need to pull in some real data for a more representative pool of potential outcomes.