This calculator builds 12 portfolios of varying stock and bond percentages and runs them from the start year to the end year. It computes the total return of $1000 and uses that to determine the following for each portfolio:
What this Calculator Means by Stocks and Bonds:
Stocks = S&P 500
Bonds = 10 year treasury bills
Compound Returns Not Average Returns:
Average returns are not computed (or meaningful) because with investing the sequence of returns impacts the final balance.
Consider a portfolio with returns of +15%, -10% and +25%. The average return is 10%, the final balance is +29.3% and the compound annual growth rate is 8.96% (eg a CD yielding 8.96% per year would be equivalent not counting risk).
Portfolio Allocations from Aggressive to Conservative:
Notes on Inflation:
This calculator finds the real value of the final balance in starting year dollars, and computes the real compound growth rate. This is useful because
This calculator computes inflation adjusted (real) values per the US CPI using the provided start and end year. This is particularly insightful as you can see the difference between the return on paper and the return in terms of how many widgets that money can buy.
Inflation was high in certain periods, like the 1970's, where returns look good, but in real terms they were terrible. Almost all financial tools use nominal values because a) people forget to factor for inflation, b) it makes the numbers look better due to the inflated returns driving up the average.
Always look at REAL returns!
Historical Data Used:
The data this calculator uses can be found here.
This calculator uses historical data. Past performance does not guarantee nor indicate future results.
To share this calculator by URL or embed it on your own website see the 'Share / Embed' button above next to the results bar after hitting Submit.
If you are interested in customizations or would like to embed our calculators in your site without our branding applied please contact us.