Portfolio Risk & Return Calculator
A Portfolio Risk & Return Calculator estimates the expected return and overall risk of an investment portfolio based on the weighted contribution of individual assets. More info →
Input
Enter portfolio allocation and expected returns.
How This Calculator Works
This calculator combines several investments into one portfolio. The expected return is the weighted average of each investment's return. Risk is combined in a way that rewards spreading your money: the portfolio's risk is lower than the weighted average of the individual risks.
The Formulas
Weight = Investment ÷ Total Investment
Portfolio Return = ∑ (Weight × Expected Return)
Portfolio Risk = √ ∑ (Weight2 × Risk2)
Portfolio Return = ∑ (Weight × Expected Return)
Portfolio Risk = √ ∑ (Weight2 × Risk2)
The risk formula assumes the investments move independently of each other (no correlation).
What Each Input Does
- Asset Class
- A name for each investment, such as equity, bonds or gold. Up to 20 can be added; fully empty rows are ignored.
- Investment Amount
- How much is invested in it. This sets its weight in the portfolio.
- Expected Return (%)
- The yearly return you expect from it.
- Risk / Standard Deviation (%)
- How much its return typically swings up or down in a year.
Step by Step
- All investment amounts are added up, and each one's weight is worked out.
- Each return is multiplied by its weight and added to give the portfolio return.
- Each risk is squared and multiplied by its weight squared; these are added and the square root is taken.
Reading the Result
Risk below 10% – conservative.
10% to below 20% – balanced.
20% or more – aggressive.
Quick Example
Equity 600,000 (return 12%, risk 18%) and bonds 400,000
(return 6%, risk 5%). Weights are 60% and 40%.
Return = 0.6 × 12% + 0.4 × 6% = 9.60%.
Risk = √(0.62 × 18%2 + 0.42 × 5%2) = 10.98%, a balanced portfolio.
Artoval Financial Labs