About the Portfolio Calculator
A portfolio is more than the sum of its returns: each dollar earns its asset class’s expected return, so the portfolio’s outlook is the dollar-weighted average across those classes. The blend shifts every time you rebalance, add money, or the classes drift.
This tool computes your dollar weights, the blended expected return, and what that implies for dollar gains per year — a useful sanity check that your allocation produces the return you think it does.
The formula behind it
The weighted average across holdings:
Portfolio return = Σ (weight_i × return_i) • Weight_i = amount_i / totalWeights are dollar-based. The blended expected return times total value gives the annual expected gain; the dollar figure is often more intuitive than a percentage.
Worked example
Defaults — $60k stocks (8%), $30k bonds (5%), $10k cash (4.5%), $100k total:
- Weights: 60%, 30%, 10%.
- Expected return = 0.60×8% + 0.30×5% + 0.10×4.5% = 6.75%.
- On $100,000, that equals about $6,750 of expected portfolio income in a year.
Takeaway: One would think “60/40-ish” and “8%” are roughly the same — but each 10% tilt to cash or bonds costs meaningful percent per year. This is why allocation drives outcomes.
What moves the result
- Allocation — the mix of asset classes is the top determinant of the portfolio’s risk and return character.
- Rebalancing bands — drift changes your true weights; else, tool inputs reflect what actually exists today, not target weights.
- Class assumptions — rates, dividends and expected equity returns each move through the weighted formula.
- Correlations — the diversification effect (lower volatility than the classes alone) is real but is not shown by this simple expected-return figure.
Practical tips
- Enter your actual current allocations, not your target — allocations drift; the number that matters is what exists.
- Rebalance once a year (or on a 5-point band). It protects the return you were modeling when you set targets.
- Diversification works through low correlation, not just having many holdings; 5 funds that all own the S&P are one fund. For fees-colored annuities…
- For an income-focused portfolio, blend this tool with the dividend calculator to see separate income and total-return stories.
- If you have to choose between 3 or many classes, model the 3 simpler ones with realistic class returns — you already see the effect of funding each.
Frequently asked questions
Is a 60/30/10 mix right for me?
Only insofar as it fits your risk tolerance (can you ride stocks down 35%?) and horizon. Young investors who can tolerate the ride over decades usually hold a majority in stocks.
Should I include real estate here?
Yes — treat real-estate class returns based on what the investment actually pays (cap rate + appreciation), or use one slot for real with your own figures per asset class.
What is the expected-return of cash at 4.5%?
A rate you would get in a high-yield savings account or money-market at current rates. Cash produces a floor — it also dilutes portfolio return discounting your total return.