The Risk And Return chart maps the relative risk-adjusted performance of every tracked portfolio by whatever measures matter to you most. Use this to study the cloud of investing options from multiple angles, to identify similar asset allocations to your own ideas, and to find an efficient portfolio appropriate for your own needs.
How To Interpret The Chart
The Risk & Return chart is similar in concept to a classic efficient frontier image that maps the average return and standard deviation tradeoffs for any combination of assets. But the calculator takes it a few steps further and allows you to not only select your own risk and return measures, but also compare the real-world results of any asset allocation you like alongside every portfolio on the site.
The vertical Y-axis maps the return metric and is measured in percent. The horizontal X-axis maps the risk metric and the units are shown next to the selection box.
- Average Return : The average annual real return since 1970
- Baseline LT Return : Conservative practical long-term compound return excluding the worst outliers (15th percentile 15-year real CAGR)
- Baseline ST Return : Conservative practical short-term compound return excluding the worst outliers (15th percentile 3-year real CAGR)
- Safe WR : The withdrawal rate that never ran out of money in any 30-year retirement
- Perpetual WR : The withdrawal rate that sustained the initial inflation-adjusted principal over every 30-year retirement
- Standard Deviation : The statistical uncertainty of the average real return
- Ulcer Index : A composite measure of drawdown depth, length, and frequency
- Deepest Drawdown : The deepest compound loss since 1970 using year-end data
- Longest Drawdown : The years it took to permanently recover the initial inflation-adjusted account value in the worst-case drawdown
- Start Date Sensitivity : A measure of the degree of potential start date bias. High scores indicate that returns are inconsistent.
The default behavior for translating portfolio concepts between countries is to interpret each portfolio through the lens of a local investor who substitutes domestic stocks and bonds where American investors would normally buy the US variety. I like to do this to evaluate the underlying portfolio theory independent of a specific market. To understand the portfolio assumptions, visit each Portfolio page, change the home country setting, and study the asset allocation inputs. You can also model your own interpretation with the provided tools.
Original Overview: Every Portfolio Has a Tradeoff, but It’s Not as Clear-Cut as You Think