Weighted Portfolio Return Calculator

Weighted Return Formula:

\[ \text{Weighted Return} = \sum (Weight_i \times Asset\ Return_i) \]

Weighted Portfolio Return:

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1. What is Weighted Portfolio Return?

Weighted portfolio return is a measure of the overall performance of an investment portfolio, calculated by summing the products of each asset's weight in the portfolio and its respective return. This provides a more accurate representation of portfolio performance than a simple average.

2. How Does the Calculator Work?

The calculator uses the weighted return formula:

\[ \text{Weighted Return} = \sum (Weight_i \times Asset\ Return_i) \]

Where:

\( Weight_i \) — The proportion of the portfolio allocated to asset i (as a decimal)
\( Asset\ Return_i \) — The return percentage of asset i
\( \sum \) — Summation of all assets in the portfolio

Explanation: This calculation accounts for the different sizes of investments in various assets, giving more weight to larger positions in the portfolio.

3. Importance of Portfolio Return Calculation

Details: Accurate portfolio return calculation is essential for performance measurement, investment decision-making, portfolio rebalancing, and comparing investment strategies.

4. Using the Calculator

Tips: Enter asset weights as decimals (e.g., 0.25 for 25%) and asset returns as percentages (e.g., 8 for 8%). Separate values with commas. The number of weights must match the number of returns.

5. Frequently Asked Questions (FAQ)

Q1: Why use weighted return instead of simple average?
A: Weighted return accounts for the different sizes of investments, providing a more accurate measure of overall portfolio performance.

Q2: What if my weights don't sum to 1.0?
A: The calculator will still compute the result, but for accurate portfolio representation, weights should typically sum to 1.0 (100%).

Q3: Can I use this for any number of assets?
A: Yes, the calculator can handle any number of assets as long as you provide matching weight and return values.

Q4: Should returns be annualized or for a specific period?
A: The returns should correspond to the same time period for all assets to ensure accurate comparison.

Q5: How often should I calculate weighted portfolio return?
A: Regular calculation (monthly or quarterly) helps track performance and inform rebalancing decisions.