Monte-Carlo simulation of a risky asset held for 1, 5, or 20 years.
The purpose of this program is to evaluate how the holding period of a risky asset, such as a stock mutual fund, with reinvestment of dividends affects the risk as defined by the standard deviation of the annualized cumulative return, and risk as defined by negative total returns. Monte-Carlo simulation is used to demonstrate that extended holding periods increase the annualized cumulative rate of return (geometric average rate), but lead to a higher probability of large negative returns! In this comparison, when the risky asset is held for only one year, the final balance is invested in a risk-free asset for the remaining 19.