# Rate of Returns

To understand the rate of return used in the calculation, please note that they are:

• per asset ( accounting for Asset Class, Sector, Region)
• per time scale (0-10, 10-20, 30+ years)

It is important to note that these figures, and the standard deviation, are just the inputs for each year; the Monte Carlo runs multiple (1,000) simulations. Therefore, it will not be the same as applying a flat return on each asset class.

Each year, we:
• Take the previous year’s balance
• Split it into the asset class breakdown based on their risk group - this is equivalent to having a yearly rebalance on your portfolio
• Apply that year’s expected returns per asset class (this is the monte carlo component)
• Subtract the fees
• Apply the tax rate
• add that sum to the previous year’s balance to get the current year’s balance AND apply inflation
The returns are guided by the underlying asset allocation for each risk profile through a Monte Carlo simulation, taking into account asset class correlations, capital market forecasts and standard deviations. The returns aren’t static. They differ every single time you run the scenario.
What we do is run 1000 simulations and identify the 80th, 50th and 20th percentiles as optimistic, likely and pessimistic.
There is no set return each year,  as the market operates in a way that does not guarantee a consistent annual return.

## Expected Returns

Returns to be multiplied by 100 for %, for example, 0.012728 for FI Gov Domestic is 1.27%

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