Estimates only — not financial, tax, or professional advice.
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What it calculates: Expected Return, Total Probability, Best-Case Return, Worst-Case Return.
Updated 5 June 2026 · Transparent assumptions
A 25/50/25 split across +20%, +8% and −10% averages to something none of them equals
Expected return multiplies each outcome by its probability and adds: 0.25 × 20 + 0.50 × 8 + 0.25 × (−10) = 5 + 4 − 2.5 = 6.5%. It is the long-run average if the same bet were repeated many times under the same odds, not a prediction of any single year.
That distinction matters because 6.5% will never actually happen here. The possible outcomes are 20%, 8% and −10%. Treating an expected value as a forecast is a common error, and it is why the best and worst cases are shown alongside — the spread between them is the part the average deliberately discards.
Weights that do not add up silently scale the whole answer
The total probability figure exists as a guard. If the scenarios sum to 80%, the expected return is computed across incomplete outcomes and is understated by a fifth — arithmetically consistent, and wrong. If they sum to 120%, it is overstated. Neither error announces itself in the headline number.
The requirement is not arbitrary. Probabilities over a complete set of mutually exclusive outcomes must sum to one, and if your scenarios do not cover every possibility, the missing probability mass belongs somewhere. Adding an explicit "everything else" scenario with a realistic return is more honest than leaving the total short.
The arithmetic is trivial; the inputs are guesses
This calculation is only as good as the scenario probabilities, and those are almost always subjective. Analysts routinely assign round numbers — 25/50/25 — that reflect a narrative rather than any measured frequency, and the output inherits that entirely.
Two biases recur. Scenarios are usually too narrow: the worst case is rarely bad enough, because genuinely extreme outcomes are hard to imagine and uncomfortable to write down. And probabilities cluster on the middle scenario, because a central estimate feels defensible. Running the calculation with a deliberately worse tail is usually more informative than refining the central case.
Risk, and the fact that you only live once
Two investments can share an expected return of 6.5% while one ranges from 5% to 8% and the other from −40% to +60%. The expected value is identical and the investments are not remotely comparable. Variance across the scenarios is the missing half, and the Sharpe ratio is one standard way of combining them.
There is also a sequencing point the average cannot capture. An outcome that wipes out the capital ends the sequence, so a bet with a positive expected value and a meaningful chance of total loss is not one to repeat. Expected value assumes many repetitions from an unchanged base, and real portfolios rarely satisfy that.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Standard DeviationSample and population standard deviation, plus variance, mean, median, quartiles, z-scores, outliers, and confidence intervals.
InvestmentProject lump-sum and regular-contribution growth, plan a goal, and solve future vs present value, with fees and inflation.
Regular InvestmentProject how regular monthly contributions grow over time — SIP-style investing, dollar-cost averaging, inflation-adjusted value, and long-term goals.
Retirement WithdrawalEstimate how long savings last under regular withdrawals (SWP) — drawdown, safe withdrawal rate, inflation, and a year-by-year schedule.
Returns are assumptions, not guarantees. Actual results may vary because of market performance, taxes, fees, inflation, and timing. This is an educational projection, not investment advice.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Verified that the expected value always lies between the best and worst scenarios, and that the probability total is reported so weights not summing to 100% are visible.
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