🥧 Portfolio Allocation Calculator
Break down your overall investment distribution across asset classes, identify concentration risks, and visualize portfolio balance.
Asset Classes & Holdings
| Asset Category | Current Amount ($) | Weight (%) | Remove |
|---|
The Only Free Lunch in Finance
Nobel laureate Harry Markowitz famously called diversification "the only free lunch in finance." By combining asset classes that are not perfectly correlated (e.g. global stocks, short-duration bonds, commodities, and cash), you can reduce portfolio drawdowns without necessarily compromising expected returns.
Frequently asked questions
What is asset allocation?
Asset allocation is an investment strategy that aims to balance risk versus reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.
Why is asset allocation responsible for most portfolio returns?
Academic studies by Brinson, Hood, and Beebower demonstrated that asset allocation accounts for over 90% of a portfolio's return variability over time, far outstripping individual stock picking or market timing.
What is the classic 60/40 portfolio?
A classic 60/40 portfolio allocates 60% of capital to equities for long-term capital appreciation and 40% to fixed-income bonds for income generation and downside volatility dampening.
How should my asset allocation shift as I age?
A traditional rule of thumb is '110 or 120 minus your age' in equities, with the remainder in bonds and stable cash equivalents, gradually shifting from capital growth toward capital preservation as retirement approaches.