Asset Allocation Calculator
Determine the optimal portfolio mix (Stocks, Bonds, Cash) and calculate rebalancing amounts to maintain risk tolerance.
About
Long-term investment success depends less on picking individual stocks and more on asset allocation. This strategy involves dividing an investment portfolio among different asset categories such as stocks, bonds, and cash. The process aims to balance risk and reward by apportioning portfolio assets according to an individual's goals, risk tolerance, and investment horizon. Over time, market fluctuations cause drift; this tool calculates the precise buying or selling required to return to the target allocation.
Rebalancing forces investors to sell high and buy low automatically. Maintaining discipline in allocation prevents emotional decision-making during market volatility.
Formulas
The deviation Δ for a specific asset class is calculated as:
Where Vtotal is the total portfolio value and T% is the target percentage (decimal).
If Δ is positive, you need to buy. If negative, you need to sell.
Reference Data
| Model | Stocks (%) | Bonds (%) | Cash/Alt (%) | Risk Level | Hist. Return (Avg) |
|---|---|---|---|---|---|
| Growth | 80 | 15 | 5 | High | 9-10% |
| Moderate (60/40) | 60 | 40 | 0 | Medium | 7-8% |
| Conservative | 30 | 50 | 20 | Low | 5-6% |
| All Equity | 100 | 0 | 0 | Very High | 10-11% |
| Income | 20 | 70 | 10 | Low | 4-5% |
| Permanent (Harry Browne) | 25 | 50 | 25 (Gold/Cash) | Medium | 6-7% |
| Swensen (Yale) | 70 | 30 | 0 | High | 9% |
| Boglehead 3-Fund | 60 | 40 | 0 | Medium | 7% |
| Butterfly | 40 | 40 | 20 | Medium | 6.5% |
| Risk Parity | 30 | 50 | 20 | Low | 6% |