---
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/glossary/simulation-assumptions"
last_updated: "2026-10-06"
md_url: "https://fincanva.com/glossary/simulation-assumptions.md"
---

# Simulation assumptions

Simulation assumptions are the three modelling choices applied to every [backtest](/glossary/backtest) — **Costs & interests**, **Taxes** and **Reinvest profits** — that decide whether results include trading costs and financing, whether tax is deducted, and whether profits compound.

**Also seen as:** backtest assumptions

## How does Fincanva handle it?

- They live in the bar at the bottom of every page you open for a [strategy](/glossary/strategy), behind the sliders button, which shows how many of the three are on (for example 2/3); it opens a panel titled **Simulation assumptions**. The word "Assumptions" is no longer a navigation label — this group carries the name.
- **Costs & interests** covers trading costs, financing and interest; **Taxes** covers [tax on dividends](/glossary/dividend-tax) and realized [capital gains](/glossary/capital-gains-tax); **Reinvest profits** compounds realized profits.
- By default a backtest is shown with [Costs & interests](/glossary/costs-toggle) and Taxes off and [Reinvest profits](/glossary/reinvest-profits) on — gross of costs and tax, with profits compounding.
- Reinvest profits also decides which annualized-return metric appears: on shows [CAGR](/glossary/cagr) (geometric), off shows [AAGR](/glossary/aagr) (arithmetic).
- The three govern the Analysis views. The [Positions view](/glossary/positions-forced-assumptions) ignores them and always reads the gross, fully-reinvested version, which is why the two can show different numbers.

## What does it look like in practice?

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 backtest — no new backtest starts. What persists is everything you didn't touch: the backtest itself, the strategy's settings and your saved tax rates are 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 backtest is reported to have produced, not what a strategy will produce.*

## Which changes are instant, and which need a re-run?

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

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

Fincanva is for education and illustration only. It is not personalised financial advice, and past or simulated results do not predict future ones. [Read the Terms Addendum](https://fincanva.com/terms/addendum#section-3)