Forecasting Your Growth: The Expected Return Calculator
When you build an investment portfolio with different asset classes like stocks and bonds, how do you estimate what its overall return might be? The Expected Return Calculator is a portfolio-level tool from salary-slip-generator.com that helps you answer this question. It calculates the weighted average expected return of your entire portfolio based on the allocation percentage and the individual expected return of each asset class.
This calculator is a crucial tool for sophisticated investors and financial planners who are building a portfolio from the ground up. It helps translate your asset allocation strategy into a single, tangible number—your portfolio's overall expected return. By entering your chosen assets, their weight in your portfolio, and your return assumption for each, you can model the potential performance of your strategy. This allows you to fine-tune your allocation to match your long-term growth targets and risk tolerance.
Why Calculate Your Portfolio's Expected Return?
- Strategic Portfolio Construction: It's a key step in designing a portfolio that is mathematically aligned with your financial goals.
- "What-If" Analysis: It allows you to run scenarios. How does adding a small-cap stock fund with a higher expected return affect your overall portfolio? What happens if you increase your bond allocation?
- Setting Realistic Expectations: It grounds your investment plan in data, helping you set realistic expectations for your portfolio's future growth.
- Connecting Allocation to Goals: It provides a direct link between your asset allocation decisions and the long-term return needed to achieve goals like retirement.
How to Use the Expected Return Calculator
Our tool makes it easy to calculate your portfolio's weighted average return.
- List Your Asset Classes: For each component of your portfolio (e.g., "US Stocks," "Bonds"), create a row.
- Enter Allocation Weight: For each asset, enter its target percentage weight in your portfolio. Ensure the total adds up to 100%.
- Enter Expected Return: For each asset, provide your assumption for its long-term average annual return.
- Calculate: Click the button to see the weighted average expected return for your entire portfolio.