Your portfolio's overall return depends on how each investment performs weighted by its allocation. This calculator computes your blended return rate and helps you understand how asset allocation affects performance.
How This Calculator Works
This calculator analyzes your portfolio's combined performance:
- Asset Values: Dollar amount in each investment/asset class
- Individual Returns: Actual or expected return for each asset
- Weights: What percentage each asset is of the total
- Weighted Return: Your portfolio's blended overall return
- Projected Growth: Future value based on current allocations
The Formula Explained
Weight = Asset Value / Total Portfolio Value
Portfolio Return = ÎŁ (Weight Ă— Asset Return)
Example: 60% stocks (+10%) and 40% bonds (+4%): Portfolio Return = (0.60 Ă— 10%) + (0.40 Ă— 4%) = 6% + 1.6% = 7.6%
Step-by-Step Example
Diversified Portfolio Analysis
| Asset | Value | % of Portfolio | Return | Contribution |
| US Stocks | $60,000 | 40% | +12% | +4.80% |
| Int'l Stocks | $30,000 | 20% | +8% | +1.60% |
| Bonds | $45,000 | 30% | +4% | +1.20% |
| Cash | $15,000 | 10% | +2% | +0.20% |
| Total | $150,000 | 100% | | +7.80% |
Portfolio grew $11,700 this year ($150,000 Ă— 7.8%).
Frequently Asked Questions
What is a portfolio return?
Portfolio return is the overall performance of all your investments combined, weighted by how much you have in each. It's the single number that tells you how your total wealth changed. Individual investments may go up or down, but portfolio return is what ultimately matters.
Why does asset allocation matter more than picking winners?
Studies show 90%+ of portfolio volatility comes from asset allocation (how much in stocks vs bonds vs other), not individual security selection. A portfolio of 80% stocks will behave like stocks regardless of which specific stocks you hold. Get the allocation right first; picking specific investments is secondary.
What is a good portfolio return?
It depends on your allocation and risk tolerance. All-stock portfolios have historically averaged 9-10% annually. 60/40 stock/bond portfolios average ~7-8%. Conservative portfolios might average 4-5%. Your return should align with your allocation—don't expect stock-like returns from a conservative portfolio.
How do I calculate weighted average return?
Multiply each investment's return by its weight (percentage of total portfolio), then sum all contributions. If 50% of your portfolio returned 10% and 50% returned 0%, your portfolio return is (0.50 Ă— 10%) + (0.50 Ă— 0%) = 5%. Larger positions have more impact.
Should I rebalance my portfolio?
Yes, rebalancing maintains your target allocation. If stocks surge, you may go from 60/40 to 70/30—more risk than intended. Rebalancing sells winners and buys laggards, maintaining consistent risk. Common approaches: annual rebalancing or when allocations drift 5%+ from targets.
What's the difference between time-weighted and money-weighted returns?
Time-weighted return ignores cash flows—it's the fair measure of investment manager performance. Money-weighted return (IRR) accounts for when you added or withdrew funds—it's your personal experience. If you invested more right before a downturn, your money-weighted return would be worse than time-weighted.
How does diversification affect my portfolio return?
Diversification reduces risk without proportionally reducing return. When some assets go down, others may go up. Over time, a diversified portfolio typically has similar returns to its riskiest component but with less volatility. The "free lunch" of investing is achieved through diversification.
Can I have too much diversification?
Theoretically no, but practical limits exist. Owning 100 stocks provides most diversification benefits; 1,000 doesn't add much. With too many holdings, transaction costs increase and rebalancing becomes complex. Total market index funds provide maximum diversification with minimal effort.
Key Points to Remember
- Weights matter most: Large allocations drive portfolio results
- Allocation > Selection: Get the stock/bond mix right first
- Rebalance periodically: Maintain your target risk level
- Don't chase returns: Past performance doesn't predict future
- Stay diversified: Reduces risk without sacrificing expected return