About the Portfolio Optimizer
What is the Portfolio Optimizer?
Diversification lowers risk because different assets do not move together. A portfolio optimizer shows how your chosen mix of equity, debt and gold trades off expected return against volatility, so you can find a combination that gives more return per unit of risk.
Enter weights, expected returns and volatilities for each asset, plus the risk-free rate. The calculator estimates the portfolio's expected return, its volatility (using assumed correlations between the assets) and its Sharpe ratio.
How to use the Portfolio Optimizer
- Equity Weight (%) (sample: 50)
- Debt Weight (%) (sample: 30)
- Gold Weight (%) (sample: 20)
- Equity Return (% p.a.) (sample: 12)
- Debt Return (% p.a.) (sample: 7)
- Gold Return (% p.a.) (sample: 8)
- Equity Volatility (%) (sample: 18)
- Debt Volatility (%) (sample: 6)
- Gold Volatility (%) (sample: 12)
- Risk-Free Rate (%) (sample: 6)
- Press Optimize Portfolio (results also refresh as you type). The result card shows the Portfolio Sharpe, along with Expected Return, Expected Volatility and Portfolio Score.
Formula used
σₚ² = Σ (wᵢσᵢ)² + 2 Σ wᵢwⱼσᵢσⱼρᵢⱼ
- wᵢ, σᵢ = the weight and volatility of each asset
- ρᵢⱼ = assumed correlations: equity–debt 0.15, equity–gold −0.05, debt–gold 0.10
- Sharpe = (Expected return − Risk-free rate) ÷ σₚ
Expected return = Σ wᵢ × returnᵢ. The score rescales the Sharpe ratio to 0–100 for easy comparison.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Equity Weight (%) | 50 |
| Debt Weight (%) | 30 |
| Gold Weight (%) | 20 |
| Equity Return (% p.a.) | 12 |
| Debt Return (% p.a.) | 7 |
| Gold Return (% p.a.) | 8 |
| Equity Volatility (%) | 18 |
| Debt Volatility (%) | 6 |
| Result | Value |
|---|---|
| Portfolio Sharpe | 0.38 |
| Expected Return | 9.7% |
| Expected Volatility | 9.67% |
| Portfolio Score | 54 |
Tips for using the Portfolio Optimizer
- Adding a lowly correlated asset such as gold can reduce volatility more than it reduces return.
- Try several mixes and compare their Sharpe ratios rather than returns alone.
- Historical volatilities: Indian large-cap equity about 15–20%, short-term debt 2–6%, gold 12–15%.