---
title: "Simulation assumptions"
description: "Simulation assumptions are three choices applied to every backtest — Costs & interests, Taxes, Reinvest profits — setting what costs, tax and compounding apply."
canonical_url: "https://fincanva.com/docs/backtesting/simulation-assumptions"
last_updated: "2026-08-27"
md_url: "https://fincanva.com/docs/backtesting/simulation-assumptions.md"
---

# Simulation assumptions

Simulation assumptions are the three modelling choices applied to every [backtest](/docs/getting-started/backtest) — **Costs & interests**, **Taxes**, and **Reinvest profits** — that decide whether results include trading costs and financing, whether tax is deducted, and whether profits compound. They sit above the results as a toggle group labelled **Simulation assumptions**, with a `{count} on` count of how many are active. The word "Assumptions" is no longer used as a navigation label — this group carries the name.

## Instant-recompute vs persisted

The three toggles and the rates behind them behave differently, which is the key to reading them:

- **Instant-recompute — the toggles.** Flipping **Costs & interests**, **Taxes**, or **Reinvest profits** switches what you see immediately, with no new run. Fincanva computes every combination when the strategy runs, so a toggle just reads the matching [already-computed variant](/docs/backtesting/precomputed-toggle-variants).
- **Persisted — the rates.** The values behind the toggles — your cost and interest assumptions, and your tax rates and [regime](/docs/backtesting/tax-regime) — are saved in Settings. Changing a rate is a settings change: it flips the run to **Needs re-run** and only takes effect after the strategy re-runs.

## Defaults in Fincanva

- **Costs & interests** covers trading costs, financing, and interest; **Taxes** covers tax on dividends and realized [capital gains](/docs/backtesting/capital-gains-tax); **Reinvest profits** compounds realized profits.
- These three choices govern the Analysis views. The [Holdings view](/docs/backtesting/holdings-forced-assumptions) ignores them and always reads the gross, fully-reinvested version, which is why the two can show different numbers.
- By default a backtest is shown with Costs & interests and Taxes off and Reinvest profits on — so out of the box the numbers are gross of costs and tax, with profits compounding.
- Reinvest profits also drives which annualized-return metric appears: on shows [CAGR](/docs/analysis/cagr) (geometric), off shows [AAGR](/docs/analysis/aagr) (arithmetic).

## Worked example

A strategy is showing a gross return with **Taxes** off. You flip Taxes on: the displayed return, its annualized figure, and the monthly numbers all drop to their after-tax values immediately, because that variant was pre-computed at the last run — no new run happens. What persists is everything you didn't touch: the run itself, the strategy's settings, and your saved tax rates are all unchanged, so flipping Taxes back off restores the gross view instantly. Editing a tax rate in Settings is the opposite kind of change — that is persisted, and the strategy must re-run before the new rate shows up.

*Switching an assumption changes what a past run is reported to have produced, not what a strategy will produce. Fincanva provides no financial advice — see [Is this financial advice?](/docs/investing-theory/is-this-financial-advice).*