Balanced Portfolio Calculator

Example Data Table

Formula Used

• Expected portfolio return: \( \mu_p = \sum_i w_i \mu_i \)
• Covariance: \( \text{cov}_{ij} = \sigma_i \sigma_j \rho_{ij} \)
• Portfolio variance: \( \sigma_p^2 = \sum_i \sum_j w_i w_j \text{cov}_{ij} \)
• Sharpe ratio: \( S = (\mu_p - r_f) / \sigma_p \)
• Future value with annual contributions: \( FV = PV(1+r)^n + C\frac{(1+r)^n-1}{r} \)

How to Use This Calculator

1. Enter your target weights for each asset class.
2. Set expected returns, volatility, and correlations.
3. Add current holdings to get a rebalancing snapshot.
4. Choose years, contributions, and inflation assumptions.
5. Click Calculate, then export CSV or PDF if needed.

FAQs

1) What does “balanced portfolio” mean here?

A balanced portfolio combines growth-oriented assets with steadier ones. This calculator uses your weights and assumptions to estimate return, risk, and a rebalancing plan.

2) Do my weights need to total 100%?

Yes, unless you enable auto-normalize. When auto-normalize is on, the calculator rescales your weights so they sum to 100% while keeping their relative proportions.

3) How is portfolio risk calculated?

Risk is estimated using volatility plus correlations across assets. The calculator builds a covariance matrix and computes the portfolio variance using weighted covariances.

4) What is the Sharpe ratio showing?

The Sharpe ratio compares expected excess return to expected volatility. A higher value means more expected return per unit of risk, using your chosen risk-free rate.

5) Why add correlations instead of only volatilities?

Correlations capture how assets move together. Two volatile assets can still reduce total risk if they are weakly correlated or move in different directions.

6) How does the rebalancing table work?

It compares your current holdings to target dollar amounts implied by your weights. The “Buy/Sell” action indicates the direction needed to match the target mix.

7) Are taxes and trading costs included?

No. Rebalancing can trigger taxes, fees, spreads, and limits. Use the results as a starting point and adjust for your actual platform and tax situation.

8) Can I use this for retirement planning?

You can explore scenarios and sensitivity to assumptions. For retirement decisions, validate inputs, consider sequence risk, and consult qualified professionals as needed.