Why transparency in capital market assumptions matters – and how the Investment Decision Lab makes them understandable and customisable.
Every investment portfolio starts with assumptions. Expected returns, volatility, inflation, interest rates and currency movements all influence how a portfolio is constructed and how its future performance is assessed.
Yet in many investment tools, these assumptions remain something of a black box.
In the Investment Decision Lab, I wanted to take a different approach: make the assumptions visible, explainable and fully customisable.
Where do expected returns actually come from?
Rather than simply assuming that US equities will return 7.3% annually over the long term, we break the assumption into its economic building blocks:
- Dividend yields and share buybacks
- Real earnings growth
- Long-term inflation
- Expected valuation changes
The framework draws on historical market evidence and research from institutions such as J.P. Morgan, BlackRock, Vanguard and AQR, combined with our own long-term assumptions.
For bonds, real estate, gold and other asset classes, we use different building blocks appropriate to their economic characteristics.
The objective isn't to predict the future with false precision. It's to make the reasoning behind every assumption understandable and open to challenge.
A Swiss investor sees a different world
A 7.3% expected return on US equities in USD is not necessarily a 7.3% return for a Swiss investor.
Our model applies long-term inflation differentials using Purchasing Power Parity (PPP) to estimate unhedged currency effects. In this example, that translates into an approximate 5.8% annual return in CHF.
Currency-hedged investments are treated differently, using interest-rate differentials to approximate hedging costs.
These are modelling assumptions, not exchange-rate forecasts – and actual outcomes can differ substantially.
Your assumptions. Your investment process. Your benchmark.
The most important principle is that our house view should never be the only view.
Users can customise capital market assumptions, inflation, risk-free rates, asset allocation rules, regional preferences, ETF selection and concentration limits.
These choices flow through portfolio construction, risk analysis, Monte Carlo simulations and investment explanations.
This creates a consistent, transparent investment process – tailored to the investor's own philosophy.
The real question
Nobody knows whether US equities will return 5%, 7% or 9% over the next decade.
But we should at least know why our model expects a particular return – and how our investment decisions change when those assumptions turn out to be wrong.
That's where meaningful portfolio analysis begins.
Explore the Investment Decision Lab:
⚙️ Customise your investment process
Note: The return figures are illustrative long-term modelling assumptions, not guaranteed outcomes or investment recommendations. The components shown in the title graphic are illustrative decompositions rather than independently verified market estimates.