Portfolio Allocation & Diversification Calculator

What is portfolio allocation?

Portfolio allocation here is the split of the values you type. A holding’s current weight is its value divided by the investable total. Cash is part of that mix when you leave it in the portfolio. Mark it as an excluded reserve when it should sit beside the mix instead of inside the weights.

Current and target allocation

A target is a weight you choose. Drift is the current weight minus that target, in percentage points. A positive drift is above the target. A negative drift is below it. The money gap is the target value minus the current value, so a holding below target shows a positive gap. Targets can be edited while they are still short of 100%. Buy and sell totals appear once the targets add up.

Portfolio concentration

The largest holding, the top three and the top five describe how much of the value sits in a few lines. The Herfindahl-Hirschman index adds the square of each decimal weight. One holding scores 1. The effective number of holdings is 1 divided by that index. A portfolio can score as if it had several equal holdings and still be concentrated in one industry, because the index does not know what the holdings contain.

Diversification

Labels for asset class, sector and region are the ones you enter. More rows do not by themselves spread economic exposure. Two funds can hold the same securities. A company’s listing country is not the map of its revenue, and a fund’s domicile is not its underlying geography. This page does not look inside a fund.

Understanding correlation

Holdings with different names can rise and fall together. Measuring that requires a history of returns. Weights alone cannot produce a correlation, a volatility, a beta or a drawdown. None of those figures are calculated here.

Rebalancing

Value-based rebalancing compares each holding with the value it would have at the target weight. Half the sum of the absolute weight gaps is the share of the portfolio that would need to move if every transfer were free and immediate. Fees, taxes, whole shares and cash that is not part of the mix change that result. Those constraints belong in the rebalancing calculator. Opening it copies the holdings only after you choose that button, and only into this browser.

Common mistakes

• Treating a fund line as if it were the same thing as the securities inside it.
• Ignoring overlap between funds that hold the same names.
• Reading a longer list of holdings as broader diversification.
• Using values that are no longer current, while the page has no prices of its own.
• Ignoring the cost of moving from one mix to another.
• Reading a gap of 5 percentage points as a 5 percent change in price.
• Leaving cash out of the picture, or counting the same cash both inside the mix and as a reserve.
• Treating a target mix as a promise about future returns.

Worked example

The desk opens with shares at 6,000, bonds at 3,000 and cash at 1,000. The investable total is 10,000. The weights are 60 percent, 30 percent and 10 percent. The targets are the same numbers, so every drift is 0 percentage points and the allocation deviation is 0 percent of the portfolio. The largest holding is Shares. The concentration index is 0.46, so the effective number of equal holdings is 2.17. These figures come from the same calculation as the desk.

Assumptions and limitations

Enter each holding’s value and, when you want a comparison, a target weight. Current weight is that value divided by the investable total. Drift is the gap in percentage points. Targets can stay in draft until they add up to 100 percent. Concentration uses the largest holdings and the Herfindahl-Hirschman index. Asset class, sector and region appear only when you label them. Nothing here is a return or a risk score.

How the calculation works

Investable value is the sum of holdings that are not marked as an excluded reserve. Current weight is holding value divided by that total, times 100. Target value is the total times the target percent, and it is shown once the targets add up to 100 within 0.05 percentage points. Drift is current weight minus target weight. The money gap is target value minus current value, so a positive gap means the holding is below target. HHI is the sum of squared decimal weights. Effective holdings are 1 divided by HHI. Total allocation deviation is half the sum of absolute decimal-weight gaps. A fund split such as Equities 60, Bonds 40 replaces the fund in the asset-class view when the split adds up to 100. Otherwise the holding is counted once under the asset class you chose.

Assumptions

• Values are in one currency label. The page does not convert them.
• A blank name is shown as unnamed. Duplicate names are kept apart by their row.
• A negative value is rejected. Short positions and liabilities are not modelled.
• Cash left in the portfolio is a weight. Cash marked as an excluded reserve is reported beside the mix and is not available to trade in this model.
• Classifications are labels you type. A listing country is not treated as revenue exposure.

A worked example

Shares at 6,000, bonds at 3,000 and cash at 1,000, with targets of 60, 30 and 10. The total is 10,000. The weights are 60, 30 and 10 percent, so every drift is 0 percentage points. The largest holding is shares. HHI is 0.46, and the effective number of equal holdings is about 2.17. Raise shares to 8,000 and the share weight becomes 66.67 percent, 6.67 percentage points above a 60 percent target. The money gap is negative because the holding is above the target value of 7,200.

Limitations

Weights are not a forecast and not a measure of correlation, volatility or loss. Two funds with different names can hold the same securities, and this page cannot see inside them. A longer list of holdings is not automatically a broader portfolio. Values can be stale because no live price is retrieved. Moving to a target has costs this page does not charge. A target mix does not promise a return. Diversification does not remove the chance of loss.

Change one input at a time if a result looks surprising. The arithmetic is only as careful as the numbers you type, and it does not know your broker’s contract size.

Portfolio Allocation & Diversification Calculator recalculates as you type. Reset restores the starting figures on that page. Those figures are an illustration of the arithmetic, not a market observation and not a record of anyone’s account. Copy and export repeat the same rounded results. Cash amounts on screen are shown to two decimal places. A conversion, a margin schedule, or a programme rule that you leave blank is not invented. A zero divisor, a stop on the wrong side of an entry, or a target-weight total other than 100 percent produces a written explanation instead of a blank or infinite number.