| Equities | -% |
| Fixed Income | -% |
Using your mouse, move the brown square left to right along the slide bar to evaluate portfolios of various asset mixes.
Locate the “slider bar” under the Pie Chart. Place your mouse’s pointer on the brown square on the slider; then left click your mouse and hold. Move the brown square left to right along the slider. Note how the slices of the Pie Chart labeled Cash, Bonds and Stock change. When you release the mouse button, the Pie Chart will remain on a specific mix. Once you have released the mouse button, you can also move the brown square using your keyboard’s left and right arrow keys.
You can click on the “tabs” of this calculator to see more information about the specific mix of Cash, Bonds and Stocks depicted in the Pie Chart.
The chart and tables on this tab detail the historical performance of portfolios invested on the first day of a month and evaluated over differing holding periods. These returns—called rolling period returns—are ranked from best to worst to illustrate the volatility in the returns investors have experienced over the past 40+ years—a period of time that represents very good and very poor market performances. Although historical returns are not a guarantee of future returns, a study of this graph is one of the best ways to understand the potential volatility associated with a specific mix of cash, Bonds and Stocks. In particular, note how large a Drawdown, or decline, of portfolio value has occurred in previous market corrections.
When changing the mix of Cash, Bonds and Stocks within the Pie Chart, data will change on this page but not necessarily for each different asset mix. Data displayed can be applicable for wide ranges of portfolio asset mixes you are evaluating. Click on the title of any topic item on this page to see a discussion of the data point.
The "risk" most investors first consider is the possibility of losing some or all of their investment. In your portfolio, risk is greatly determined by its mix of Stocks vs. Cash and Bond investments. The larger the percentage of Stocks, the greater the risk—and the potential for high returns.
| Range of Historic Returns (1/1/1976 - 12/31/2015) | ||||||
| Quarter | 1 Year | 2 Year | 3 Year | 5 Year | 10 Year | |
| High | x | x | x | x | x | x |
| 25% Ranking | x | x | x | x | x | x |
| Mid | x | x | x | x | x | x |
| 75% Ranking | x | x | x | x | x | x |
| Low | x | x | x | x | x | x |
| Most Recent Performance | ||||||
| Shown as (●) | x | x | x | x | x | x |
| How often were returns positive or negative? | ||||||
| Made Money | x | x | x | x | x | x |
| Lost Money | x | x | x | x | x | x |
| % Drop | Down How Quick | Months to Recovery | Month of Peak | Month of Trough | Month of Recovery | % Down
If Not Recovered |
|
| Max Drawdown | x | x | x | x | x | x | x |
| 2nd Highest Drawdown | x | x | x | x | x | x | x |
| 3rd Highest Drawdown | x | x | x | x | x | x | x |
The best way to determine how to invest your money is often first knowing when you need your money. Short-term investment objectives should generally be invested conservatively: The possibility of a higher investment return from a riskier investment that ends up causing a loss may negatively affect your ability to meet short-term obligations.
When undertaking retirement planning, use expected long-term return numbers that are conservative--particularly as you determine how much you need to save each year. Don't base your retirement plans on market returns that historically have only occurred relatively infrequently. Remember, assuming that your investment strategy will generate a lower return does not mean that you won't earn a higher return if the markets are favorable. Please review the Historic Volatility chart for this portfolio under the Market Risk Tab.
Investing involves risk. You make money because of the risk, not despite the risk. Take only the amount of risk that is both appropriate for your circumstances and that you are willing to accept. Investment success does not require that you always know in advance if the markets are going to go up or down. Successful investing usually requires you to maintain an investment strategy long-term. Please review the Historic Volatility chart for this portfolio under the Market Risk Tab.
Markets can be very volatile in the short-term, particularly if you own stocks within your portfolios. Also, be aware that you can lose money in bonds when interest rates rise or due to the failing credit of a bond issuer. Investors who maintain their investment strategy long-term despite short-term losses have generally been rewarded for their patience when the markets recover and head back higher.
The same word can mean different things to different people. The best way to understand how much risk is involved in this particular portfolio mix is to study the Historic Volatility chart for this portfolio under the Market Risk tab. If you need help interpreting this chart, watch the videos on Trailing-Period Returns and Rolling-Period Returns. From the Main Menu, click on Investment Help, then Investment Videos. These videos and others of interest can be found under the section titled Investment Basics.
This Volatility Calculator graphically emphasizes the importance of maintaining a long-term, prudent investment strategy. Such discipline will help reduce the risk of investing while you achieve the returns possible given the dynamics of the financial markets. Invest your money in a portfolio that reflects only the price volatility you are comfortable accepting.
The Pie Chart displays a portfolio mix of only Cash, Bonds and Stocks. However, the data points reported on the Market Risk tab involve calculations of allocations to as many as seventeen “sub-asset classes”. We categorize the Pie Chart’s current allocation to these sub-asset classes in the table below.
| Asset Class | Percentage |
Other Portfolios: There are other mixes of asset classes to the ones we illustrate above which have similar risk and return characteristics.
| Confidence Factors (1/1/1976 - 12/31/2015) | ||||||
| Quarter | 1 Year | 2 Year | 3 Year | 5 Year | 10 Year | |
| 75% | x | x | x | x | x | x |
| 80% | x | x | x | x | x | x |
| 85% | x | x | x | x | x | x |
| 90% | x | x | x | x | x | x |
| 95% | x | x | x | x | x | x |
| 96% | x | x | x | x | x | x |
| 97% | x | x | x | x | x | x |
| 98% | x | x | x | x | x | x |
| 99% | x | x | x | x | x | x |
| 100% | x | x | x | x | x | x |
Do you need to get rates of return on your portfolio that the financial markets have only delivered 50% of the time? That’s a coin toss!
Or should you base your planning on a portfolio where the return you need is one the financial markets have produced 75% of the time? 85%? 90%? 95%? Just how confident do you want to be in your financial success? Expecting “worst case” a lower rate of return from a portfolio does not mean you won’t get higher rats of returns should the markets be favorable.
When you need your money determines how you should invest your money! Short-term investment objectives are best achieved with conservative investment strategies. The table above illustrates dramatically how the risk of a short-term loss is so much less with a portfolio allocated mostly to fixed income and cash compared to portfolios with increasing allocations to stocks. The risk you take to earn high returns by investing in stocks is more appropriate for longer-term investment objectives.
The table above shows the rates of returns over different time periods at various “confidence factors” ranging from 75% to 100%. Think in these terms: “I need to target for an X% rate of return to achieve my investment objectives. Historically, Y% of the returns earned by my portfolio strategy have been my target return or better if that strategy is maintained for Z years or more. That’s how confident I am in my financial success!!