The high-level goal of Portfolio Charts is to offer a neutral place to study the real-world performances of all types of investing ideas. My hope is that by painting a more complete and understandable picture of how different portfolios work, the charts will help people identify a simple and effective asset allocation to help them achieve their important life goals. Here’s how the returns for each portfolio are calculated.
Table of Contents
1) All returns are taken as a snapshot on December 31st.
2) Returns include reinvested dividends and interest.
3) Portfolios are rebalanced back to their target percentages annually.
4) Returns quoted are REAL. This means that all returns are adjusted for inflation. Inflation varies every year and is measured by CPI of each country.
5) Returns are expressed in the local currency of each country. For Euro Area countries, exchange rates prior to 1999 are in local currency and after 1999 are in Euro. Portfolio returns are primarily driven by changes in exchange rates, which make them neutral to the switch to the Euro.
6) For calculators like Portfolio Growth or Retirement Spending that account for annual contributions or withdrawals, those cash flows maintain constant purchasing power and adjust for inflation each year.
7) Returns ignore taxes. Individual tax situations are far too complex for a tool like this to model. Your mileage may vary.
8) The tools automatically calculate the expense ratio for each portfolio and account for those costs in the annual returns. The expense ratios assume that the portfolio is perfectly balanced, and normal percentage drift throughout the year may introduce a small amount of error depending on how often individual funds calculate and collect the fee.
9) Some tools allow for the selection of custom percentage-based fees such as adviser costs and wealth taxes. Returns do not account for fixed costs such as transaction fees. Your own fees may vary. When interpreting numbers, be sure to account for the expenses for your own personal investments.
Be sure to read the detailed notes on the individual Charts pages for application-specific assumptions and methodologies.
Verified vs. Estimated Returns
Most of the calculators include a designation of “verified” and “estimated” returns data. Historical returns come from a wide variety of sources, and reputable data is not always available all the way back to 1970. In these cases returns are filled in with similar-but-different assets to provide the best investing context available. For example, when there is no large cap value European data prior to 1975 I run the numbers using European large cap blend. To ensure that the results are accurate even with these alternative sources, every portfolio is tested to verify that it properly models the desired design intent.
For any given year prior to 1988, there may be one or more assets that have been supplemented with outside data. The compound growth of this “replacement portfolio” is compared against the desired portfolio over every investment period from 1988-present, measuring how well the model tracked the real thing. A “verified” portfolio account value remained within +/- 5% of the desired account value two-thirds of the time, and within +/- 10% 95 percent of the time. Basically, your brokerage account looked like this:
Any year that contains a replacement portfolio that does not track within the acceptable band is labeled “estimated”, and the data from that year is clearly called out on the chart. This information can still be very valuable for investing context and should not be entirely dismissed, but it is not as dependable as verified results.
Each calculator runs these calculations in the background for every investing year on a portfolio-by-portfolio basis, so you can rest assured that the historical results you see properly model the portfolio you are researching within a reasonable margin of error.
The one calculator excluded from this process is the Portfolio Finder, as the calculations are too complex to run on so many portfolios at once. So if you find a portfolio you like using the Portfolio Finder, be sure to test it in the other calculators as well.
I’m simply the supplier of portfolio performance information, and the original authors deserve full credit for each portfolio idea. I do what I can to support the smart people who share their diverse investing knowledge in the following ways:
- I provide attribution to each author and encourage everyone to read their original work. You can find references to their books and blogs on each portfolio page.
- I do my best to preserve design intent and to not twist the author’s recommendation in any way. The only reasons I may change percentages are when I don’t have the right data or need to round to the nearest percent to not over-burden the tools. When that happens I try to faithfully represent the design intent as closely as possible. I always point out when I do that and why.
If you ever see something that looks like an error or that you think needs clarification, please don’t hesitate to contact me. Trust is earned, and I’m willing to do the work!
Portfolio Charts is somewhat unique in how it is able to model portfolios in multiple countries using their own currency and local inflation. While many portfolio authors write from a US perspective, I also do my best to interpret the underlying philosophy to the investments available in a different country.
The portfolio translations use the following logic:
Australian, Canadian, and Japanese portfolios use domestic & international definitions where “domestic” means your own home country and “international” is a broad developed world fund. The same interpretation strategy applies to European portfolios with simple asset types. For European portfolios with small and value tilts, I take advantage of the more numerous investing options in broad Europe funds and describe portfolios with Europe as the domestic market and the United States as the international market. Doing it that way not only follows fund availability but also captures more of the factor-based asset nuance in these types of portfolios.
To see the interpretation for your country, look for the charts on a portfolio page and select your home country from the dropdown at the top. If you disagree with my interpretation for a portfolio or simply prefer your own tweaks, that’s great! You can always model your own version with the My Portfolio tool or any of the other fully customizable charts.
While I go to great lengths to double-check every source, the data has no guarantee of accuracy. Not only do I sometimes make mistakes, but the primary data sources also occasionally update their own numbers based on new information. Never make a decision based solely on the data you see here.
The numbers do not account for taxes. Properly managed they can be held to a minimum, but they can also take a big bite out of your returns depending in your personal situation. So be smart about it and plan conservatively. When in doubt, consult a tax professional.