Calculate the weighted average return on your investment portfolio instantly
Portfolio Assets
Enter the current market value and the expected or actual return percentage for each asset in your portfolio.
Market value of investment
Annual return percentage
Weighted Average Return
0.00%
Based on your asset allocation
Total Portfolio Value
$0
Projected Annual Profit
$0
Number of Active Assets
0
Portfolio Allocation
Figure 1: Visual breakdown of your portfolio weights by asset value.
Detailed Breakdown
Asset
Value ($)
Weight (%)
Return (%)
Contribution (%)
Table 1: Detailed analysis of how each asset contributes to the total weighted return.
Calculate the Weighted Average Return on Your Investment Portfolio
Understanding the true performance of a diversified portfolio requires more than just looking at individual gains and losses. To get an accurate picture, you must calculate the weighted average return on your investment portfolio. This metric accounts for the fact that not all investments are equal in size; a 10% return on a $100,000 asset impacts your wealth significantly more than a 10% return on a $1,000 asset.
Whether you are managing retirement funds, a stock portfolio, or a mix of real estate and bonds, knowing how to calculate the weighted average return is essential for effective financial planning and risk management.
What is Weighted Average Return?
The weighted average return is a performance metric that calculates the average rate of return of a portfolio by weighing each asset's return according to its proportion of the total capital. Unlike a simple average, which treats all data points equally, the weighted average return assigns a "weight" to each component based on the monetary value invested in it.
Investors use this calculation to:
Determine the overall efficiency of their capital allocation.
Compare their portfolio's performance against benchmarks like the S&P 500.
Make informed decisions about rebalancing assets.
Common Misconception: Many investors simply average the percentages of their holdings (e.g., (5% + 10%) / 2 = 7.5%). This is incorrect if the amounts invested are different. If you have $90,000 at 5% and $10,000 at 10%, your actual return is much closer to 5% than 7.5%.
Weighted Average Return Formula
To calculate the weighted average return on your investment portfolio, you use the following mathematical formula:
WAR = Σ (Weight_i × Return_i)
Where:
WAR: Weighted Average Return.
Weight_i: The value of Asset i divided by the Total Portfolio Value.
Return_i: The percentage return of Asset i.
Variable Explanations
Variable
Meaning
Unit
Typical Range
Asset Value ($)
Market value of a specific holding
Currency (USD)
$0 – Unlimited
Return Rate (%)
Annualized yield or growth rate
Percentage
-100% to +100%+
Total Value ($)
Sum of all asset values
Currency (USD)
Sum of inputs
Weight (%)
Proportion of total portfolio
Percentage
0% to 100%
Practical Examples
Example 1: Conservative Portfolio
An investor has a conservative strategy focused on bonds and stable stocks. They want to calculate the weighted average return on their investment portfolio to see if they are beating inflation.
Asset A (Bonds): $70,000 invested at 3% return.
Asset B (Blue Chip Stocks): $30,000 invested at 8% return.
Calculation:
Total Value = $100,000
Weight of A = 70,000 / 100,000 = 0.70 (70%)
Weight of B = 30,000 / 100,000 = 0.30 (30%)
Weighted Return = (0.70 × 3%) + (0.30 × 8%)
Result = 2.1% + 2.4% = 4.5%
Example 2: High Growth Aggressive Portfolio
Another investor has a smaller portfolio but takes higher risks. They need to calculate the weighted average return to justify the volatility.
Our tool simplifies the math so you can focus on strategy. Follow these steps to calculate the weighted average return on your investment portfolio:
Enter Asset Values: Input the current market value (in dollars) for up to 5 different assets or asset classes in the "Asset Value" fields.
Enter Return Rates: For each corresponding asset, input the expected or realized annual return percentage. Use negative numbers for losses.
Review the Weights: The tool automatically calculates how much "weight" each asset carries in your total portfolio.
Analyze the Result: Look at the "Weighted Average Return" at the top. This is your portfolio's true performance number.
Check Allocation: Use the generated pie chart to visualize your risk exposure. If one slice is too large, your portfolio might be unbalanced.
Key Factors That Affect Your Results
When you calculate the weighted average return on your investment portfolio, several external and internal factors influence the final output:
Asset Allocation: This is the most significant factor. Heavily weighting a high-performing asset increases your average, while heavily weighting a poor performer drags it down drastically.
Market Volatility: Return rates are rarely static. A sudden market correction can flip a positive return to negative, altering your weighted average instantly.
Expense Ratios and Fees: If you are calculating net returns, remember to subtract management fees (e.g., 0.5% or 1%) from your return rates before inputting them.
Inflation: While the calculator provides nominal returns, your real return is the weighted average minus the inflation rate.
Dividends vs. Capital Gains: Ensure your "Return Rate" includes both price appreciation and any dividends received to get an accurate total return.
Taxes: Pre-tax and post-tax returns differ. For accurate planning, consistency is key—use either all pre-tax or all post-tax figures.
Frequently Asked Questions (FAQ)
Why is the weighted average different from the simple average?
A simple average assumes you invested the exact same amount in every asset. The weighted average accounts for the reality that you have more money in some assets than others, giving the larger investments more influence over the final result.
Can I use this for monthly returns?
Yes. Simply input the monthly return percentage instead of the annual percentage. However, ensure all inputs are consistently monthly to calculate the weighted average return on your investment portfolio correctly for that period.
How do I handle negative returns?
Enter negative returns with a minus sign (e.g., -5). The calculator logic will subtract the weighted loss from the total performance, accurately reflecting the drag on your portfolio.
Does this calculator include cash holdings?
Yes, you should include cash as an asset. Usually, cash has a low return (0% to 4% depending on savings rates). Including cash is vital because it often dilutes the overall portfolio return, known as "cash drag."
What is a good weighted average return?
This depends on your risk tolerance. Historically, a balanced portfolio might aim for 7-10% annually. A conservative portfolio might target 3-5%, while aggressive ones might seek 12%+. Context is key.
Should I rebalance if my weighted average is high?
Not necessarily. A high return is good, but check your allocation chart. If 90% of your value is in one risky stock, your portfolio is vulnerable. Rebalancing manages risk, not just returns.
How often should I calculate this?
It is recommended to calculate the weighted average return on your investment portfolio quarterly or annually. Checking too frequently can lead to emotional decision-making based on short-term noise.
Can I use this for real estate?
Absolutely. Enter the property equity as the "Value" and the capitalization rate (cap rate) or cash-on-cash return as the "Return Rate".
Visualize the power of reinvesting your weighted returns.
// Initialize standard values
window.onload = function() {
calculatePortfolio();
};
function calculatePortfolio() {
var totalValue = 0;
var totalWeightedReturnAmt = 0;
var assetCount = 0;
var assets = [];
// Loop through fixed 5 rows
for (var i = 1; i 0) {
if (isNaN(ret)) ret = 0; // Default return to 0 if empty
totalValue += val;
assets.push({
id: i,
value: val,
rate: ret,
returnAmt: val * (ret / 100)
});
assetCount++;
}
}
}
// Calculate Totals
for (var j = 0; j 0) {
weightedAvg = (totalWeightedReturnAmt / totalValue) * 100;
}
// Update DOM
document.getElementById("finalResult").innerHTML = weightedAvg.toFixed(2) + "%";
document.getElementById("totalValue").innerHTML = "$" + formatMoney(totalValue);
document.getElementById("totalProfit").innerHTML = "$" + formatMoney(totalWeightedReturnAmt);
document.getElementById("assetCount").innerHTML = assetCount;
// Color code result
var resultEl = document.getElementById("finalResult");
if(weightedAvg >= 0) {
resultEl.style.color = "#28a745"; // Green
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resultEl.style.color = "#dc3545"; // Red
}
updateTable(assets, totalValue);
drawChart(assets, totalValue);
}
function updateTable(assets, totalValue) {
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tbody.innerHTML = ""; // Clear existing
if (assets.length === 0) {
tbody.innerHTML = "
No assets with value entered
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return;
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for (var i = 0; i < assets.length; i++) {
var asset = assets[i];
var weight = (asset.value / totalValue) * 100;
// Contribution to total WAR = Weight * Rate
var contribution = weight * (asset.rate / 100);
var tr = document.createElement("tr");
tr.innerHTML =
"
Asset " + asset.id + "
" +
"
$" + formatMoney(asset.value) + "
" +
"
" + weight.toFixed(1) + "%
" +
"
" + asset.rate.toFixed(1) + "%
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"
" + contribution.toFixed(2) + "%
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var height = canvas.height;
var radius = Math.min(width, height) / 2 – 10;
var centerX = width / 2;
var centerY = height / 2;
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ctx.clearRect(0, 0, width, height);
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ctx.fillText("No Data", centerX, centerY);
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var startAngle = 0;
// Colors for 5 assets
var colors = ["#004a99", "#28a745", "#ffc107", "#17a2b8", "#dc3545"];
for (var i = 0; i < assets.length; i++) {
var asset = assets[i];
var sliceAngle = (asset.value / totalValue) * 2 * Math.PI;
var endAngle = startAngle + sliceAngle;
ctx.beginPath();
ctx.moveTo(centerX, centerY);
ctx.arc(centerX, centerY, radius, startAngle, endAngle);
ctx.closePath();
// Cycle colors
ctx.fillStyle = colors[(asset.id – 1) % colors.length];
ctx.fill();
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ctx.stroke();
startAngle = endAngle;
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}
function formatMoney(num) {
// Simple regex for thousands separator
return num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
function resetCalculator() {
document.getElementById("val1").value = "50000";
document.getElementById("ret1").value = "8.5";
document.getElementById("val2").value = "30000";
document.getElementById("ret2").value = "4.2";
document.getElementById("val3").value = "20000";
document.getElementById("ret3").value = "12.0";
document.getElementById("val4").value = "";
document.getElementById("ret4").value = "";
document.getElementById("val5").value = "";
document.getElementById("ret5").value = "";
calculatePortfolio();
}
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