Home/Finance/Portfolio Allocation Tool

Portfolio Allocation Tool

Diversify with precision. Model conservative, moderate, or aggressive growth strategies based on Nobel Prize-winning Modern Portfolio Theory.

Investment Strategy

Asset Diversification

"Diversification is the only free lunch in investing." These profiles use Modern Portfolio Theory principles to balance risk and expected return.

Optimized Distribution
Large Cap Stocks$40,000

40% Allocation

Bonds (Fixed Income)$35,000

35% Allocation

International Stocks$15,000

15% Allocation

Small Cap/Growth$10,000

10% Allocation

Strategy Focus

moderate Growth Modeling

This tool is useful for DIY Investors, Wealth Managers, and Asset Allocators (and for everyone else who wants to build a diversified portfolio that aligns with their risk tolerance and goals).

Related Calculators

Return on investment

Quantify your success. Calculate ROI, IRR, and NPV to determine the true profitability of your business projects or assets.

Break-Even Calculator

Find the point where your business revenue covers all fixed and variable costs.

Stock Return Pro

Calculate total gains including capital appreciation, dividends, and fees.

Sales Tax & Tip Calculator

Calculate sales tax and tip amounts with bill splitting for multiple people.

Strategic Asset Allocation: The Foundation of Wealth

Asset allocation is the process of deciding how to divide an investment portfolio among different asset categories, such as stocks, bonds, and cash. It is arguably the most important decision an investor makes—studies show that asset allocation, rather than individual stock selection, determines over 90% of a portfolio's return variability.

The Investor.gov (SEC) portal emphasizes that the right asset mix is a personalized decision based on your time horizon and risk tolerance.

Modern Portfolio Theory (MPT)

Our models are based on the principles of Modern Portfolio Theory, which suggests that you can maximize returns for a given level of risk by diversifying across uncorrelated assets.

Stocks

High Growth / High Risk

Equities represent ownership in companies. They offer high long-term returns but come with significant price volatility.

Bonds

Income / Lower Risk

Fixed-income assets provide stability and regular interest payments, acting as a "shock absorber" for your portfolio.

Cash/Equiv

Stability / No Growth

High-yield savings or money market funds offer liquidity and safety but usually struggle to outpace inflation.

Risk Profiles Explained

  • Aggressive (80-100% Stocks): Suitable for young investors with a multi-decade time horizon who can stomach large market swings in exchange for maximum growth.
  • Moderate (60/40 Split): The classic balanced portfolio. It aims for growth while using bonds to reduce overall volatility.
  • Conservative (20-40% Stocks): Focuses on capital preservation and income. Suitable for those near or in retirement.

The Importance of Rebalancing

Over time, some assets grow faster than others, causing your portfolio to drift away from your target allocation. As noted by the Federal Reserve, systematic rebalancing—selling high and buying low to restore your target mix—is a key discipline for managing risk over long periods.

Inflation and Real Returns

Always remember that your portfolio must grow at a rate higher than inflation to increase your purchasing power. A "safe" portfolio of cash might actually be losing value in real terms if the inflation rate exceeds the interest rate.