The Equalizer chart shows how chaotic asset noise mixes into a clear portfolio signal. Use this to study index correlations, understand the return extremes that real people experienced, and explore how modern portfolios use multiple volatile assets to create a final recipe far more desirable than any single ingredient.

Chart

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Overview

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The Equalizer chart shows every inflation-adjusted annual return for your selected portfolio and home country as a single line running from left to right, colored blue in gain years and red in loss years. It also displays the annual returns of every individual asset in the portfolio as gray lines to help visualize how they influence overall performance. You can think of it as a sound equalizer where individual years replace individual frequencies, and every asset is a single channel in the mix. Hover over or tap any line to identify which asset it is.

The dashed blue and red lines automatically mark the highest and lowest portfolio returns on record, and the sidebar translates those extremes into two simple stats: Intensity and Balance. Generally speaking, portfolios with low intensity and high positive balance lead to satisfied and stress-free investors.

As you look at the gray asset lines, note how some of them track each other very closely while others swing wildly in different directions. This is a visual representation of asset correlations, and you can use this chart to look for alternative assets that complement the ones you already own and smooth the ride for the portfolio as a whole. To study how often those individual portfolio years landed at any particular return level, check out the Annual Returns chart.

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Calculations

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Intensity

The spread between the highest and lowest annual returns of the portfolio. It is scaled to single digits to make it simpler to reference, and every unit of intensity represents a 10% spread in returns.

Balance

Not every type of volatility is equally unpleasant, as nobody complains about large positive spikes while most people fear large losses. Balance represents the proportion of the volatility extremes that are either positive or negative, on a scale of +/- 10. A balance of 0 means the best returns are the same scale as the worst. +2 means the extremes are somewhat biased toward gains, while -8 means they are highly biased toward losses. And a theoretical portfolio with a +10 balance never experienced a single negative return.

Assumptions

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• All returns are adjusted for inflation and expressed in the home country’s currency.
• Portfolios are rebalanced annually, and returns include reinvested dividends.
• Returns ignore taxes and fund fees.
• Calculations cover every year since 1970 for the selected home country.

Discussion

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Articles

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