Every return field the simulator reads is an average one-year return (arithmetic mean), the number it draws each year, not the rate wealth compounds at.
Because down years hurt more than up years help, simulated wealth compounds a
little slower than the average, by roughly half the variance (about
vol² / 2). At 17% equity volatility that is ~1.4 percentage points.
Why it matters when copying numbers in
Published 10-year outlooks (JPMorgan, Vanguard, Schwab) quote the compound
(annualized) number. Pasting one directly into a return field makes your plan
about vol² / 2 more pessimistic than the source intended. Two things protect
you:
- The Assumptions panel shows the implied compound rate beside the return fields, so you can sanity-check against what a published outlook quotes.
- "Apply today's market" and the published-outlooks consensus button do the conversion for you. They treat their inputs (1/CAPE, yields, CMA tables) as compound predictors and add
vol² / 2per asset before filling the fields.
Both buttons convert at your current vol fields, so the conversion matches whatever you are actually simulating with, not a preset stand-in. At the tier defaults every vol agrees with the shared long-run block anyway; at a hand-customized vol (including zero, for a single reproducible path) the converted numbers move with it.
If you type numbers in by hand from a published outlook, add about
vol² / 2to equity and bond first. Or use the buttons, which do it correctly.
The consensus numbers are a shipped, dated constant with no silent web fetch; a stale scrape is worse than a visible vintage. The UI flags the row when the vintage is over 15 months old.