Personal Portfolio

Look at your savings, home, investments and paycheck the way a portfolio manager would: as one portfolio with returns, risk and an efficient frontier.

Used at Hungry Machines to

think through how much of the founders' wealth rides on the business.

Open the calculator

What it does

Your paycheck as an asset Your future salary has a present value and a risk, like a bond. The calculator prices it and compares it with a venture.
One portfolio, not four accounts Savings, home, investments and income sit side by side, with the return and risk you assume for each.
An efficient frontier you can read See where your mix sits against the best mixes for the same risk, and choose what to change.
Tested against history and simulated futures Replay your mix through 19 years of returns, then run thousands of simulated paths to see how often you reach your goal.

How it works

Step 1

Tell it what you own and earn

Enter your salary and the years you expect to work, then list your savings, investments, home and debts. Each type starts from a history-based return and risk that you can change.

Step 2

See where you sit

The page plots your mix against the efficient frontier, the set of mixes with the highest return for each level of risk, and shows how far you are from it.

Step 3

See what to move

Pick a target on the frontier and read the dollar amount to move in each holding. You choose whether to act on it.

Step 4

Test the mix

Replay it through history, see which holding carries your risk, check how your correlations drifted, and run a Monte Carlo simulation of the years ahead. One window of history and one set of assumptions can mislead, so read the caveats beside each result.

What this tool is

Personal Portfolio treats your savings, investments, home, debts and future paycheck as one portfolio. It shows the return and risk of the whole, and where your mix sits against the best mixes you could build from the same pieces.

Part 1: your paycheck as a bond

Your next years of salary can be priced like a bond: a payment each year, rising at the raise you expect, discounted back to today. The number depends on the discount rate you pick, so try a few. You can also describe a venture as a few outcomes with a probability each, and see what it would need to pay to match the job.

Part 2: the efficient frontier

Every mix of your holdings has an expected return and a volatility, which is how much the value swings from year to year. The frontier is the curve of mixes that earn the most return for each level of volatility. A mix is efficient when it sits on the upper part of that curve. A mix below it is inefficient: another mix with the same volatility earns more, or one with the same return swings less.

Part 3: test the mix

Part 3 asks how the mix would have fared and how it might fare. The Backtest replays it through 19 years of history. The Risk tab shows which holding drives the swings. The Correlations tab shows how the links between holdings moved. The Monte Carlo tab draws thousands of possible futures and counts how often you reach your goal. You can read the results in today's dollars.

Some holdings are locked. You cannot sell a piece of your home, your mortgage or your job, so the calculator keeps their weights where they are and optimizes the rest around them.

An educational model, not investment advice. Every number is an assumption you can change.

Start here

The calculator opens with an example household so you can see every part working: a $100,000 salary, a home with a mortgage, and a few savings and investment accounts. These are not your numbers. Replace them with yours as you go. Nothing you type leaves your browser.

Part 1: your paycheck. Enter your salary, the raise you expect each year and how many more years you plan to work. The page tells you what that pay is worth as one sum today. Press "Add this job to my portfolio" if you want it counted with everything else you own.
Part 2: what you own and owe. Replace the example rows with your own savings, retirement and brokerage accounts, home and mortgage, or press "Clear all" and start from an empty table. Each row fills in a typical return and swing from history. Change them if you see it differently.
See where you stand. The cards and the chart show what your mix might earn in an average year and how much it might rise and fall along the way. "What to move" lists the dollar changes that would get you a better mix.
Part 3: test it. See how your mix would have done since 2007, how often it reaches your goal across thousands of simulated futures, and which holding carries most of your risk.

Words with a dotted underline open a short explanation when you click or tap them. They are all in Words on this page, below the calculator.

Where the defaults come from

Loading the default assumptions.

Three things to keep in mind

History is one window that includes 2008 and a decade of near-zero interest rates. It is a starting point, not a forecast.
The home index is price only, and appraisal-based prices are smoothed, so it understates how much one house can swing.
A mortgage is a fixed-rate debt: its return is its rate and its volatility is zero.

What this leaves out

The model has no taxes, no fees or trading costs, and no contribution limits. Parts 1 and 2 show nominal figures. Part 3 can show today's dollars, and its Monte Carlo tab simulates future paths from the assumptions you set or from the same 19 years of history. It does not store your portfolio or ask you to log in, and it does not estimate returns with anything fancier than the historical average. The frontier looks at one period, so it does not plan a series of rebalances. You set the assumptions and you choose what to do with the result.

Words on this page

The finance words the calculator uses, in plain terms, in the order you meet them.

Part 1: your paycheck

Worth today (present value): What a stream of future payments is worth as one lump sum today. A dollar paid years from now is worth less than a dollar in hand, because the dollar in hand could be earning something in the meantime.
Discount rate: The yearly return you give up by waiting for money. The higher it is, the less future pay is worth today. A rate near what safe savings earn treats the pay as certain; a higher rate allows for the chance that it stops.
Coupon: The regular interest payment a bond makes. On this page, each year's salary plays that part.
Duration: The average wait, in years, for the money, with each payment counted by what it is worth today. The longer the duration, the more the value today moves when the discount rate changes.

Part 2: what you own and owe

Net worth: Everything you own minus everything you owe.
Weight: A holding's share of your net worth. $30,000 of savings in a $300,000 net worth is a weight of 10%. A debt has a negative weight.
Expected return: The average yearly gain you assume for a holding, before taxes and fees. Real years land above and below it. It is a long-run average, not a promise.
Volatility: How much a holding's value swings from year to year, measured as the standard deviation of yearly returns. With an 8% expected return and 16% volatility, about two years in three land between -8% and +24%, and the rest land further out.
Correlation: How closely two holdings move together, on a scale from -1 to 1. Near 1 they rise and fall together; near 0 they move on their own; below 0 one tends to rise when the other falls. Holdings with low correlation smooth out each other's swings.
Minimum and maximum weight: Limits you set on each holding. A minimum of 0% means the calculator will never bet against a holding by borrowing it to sell, which is called shorting. A maximum of 100% caps it at your whole net worth. -1000% and 1000% remove the limits.
Locked: A holding the calculator will not move, such as your home, your mortgage or your future pay. It finds the best mix of everything else around it.
Efficient frontier: The curve of the best mixes you could build from your holdings: for each level of volatility, the mix with the highest expected return. A mix on the upper part of the curve is efficient. A mix below it is not, because another mix earns more for the same swings or swings less for the same return.
Risk-free rate: What you could earn with almost no swings, such as a savings account or Treasury bills. The page starts from the cash return, and you can change it.
Sharpe ratio: Expected return above the risk-free rate, divided by volatility: the extra return a mix earns for each unit of swing. Higher is better. It is most useful for comparing one mix with another.
Global minimum variance: The mix of your holdings that swings the least, whatever it earns.
Maximum Sharpe: The mix with the highest Sharpe ratio: the most extra return for each unit of swing. On the chart it is where the straight capital market line touches the frontier.
Capital market line: The straight line from the risk-free rate through the maximum-Sharpe mix. A point on it is that mix combined with cash.
Percentage points (pp): The gap between two percentages. Going from a 10% weight to a 15% weight is a change of 5 percentage points.
Rebalancing: Selling some of what grew and buying some of what shrank, to get back to the mix you chose.

Part 3: testing the mix

Backtest: Running a mix through past returns to see what would have happened. It shows how the mix behaved in real years such as 2008, but the past will not repeat exactly.
CAGR (yearly growth rate): The steady yearly return that would turn the starting value into the ending value. Real returns jump around; CAGR is the smooth rate that ends in the same place.
Drawdown: How far the value sits below its previous high. The maximum drawdown is the worst fall from a high to a low, and "Recovered" is the month the value got back to that high.
Sortino ratio: Like the Sharpe ratio, but only falls count as risk, so a mix is not marked down for rising fast.
Share of risk: How much of the whole portfolio's swing comes from each holding. It depends on the holding's size, its volatility and how it moves with everything else, so a small share of your money can carry a large share of your risk.
Risk parity: A mix in which each investment carries the same share of the risk. Steadier holdings get more money so they carry as much risk as the volatile ones. Cash is left out because it hardly swings.
Monte Carlo simulation: Drawing thousands of possible futures from your assumptions and counting how they turn out. It gives a range of outcomes instead of a single guess.
Median and percentiles: Line the simulated futures up from worst to best. The median is the one in the middle. The 10th percentile is the one only 10% of futures fall below: a bad but plausible case. The 90th percentile is a good case.
Nominal and today's dollars: Nominal dollars are amounts as they will be at the time. Today's dollars take inflation out, so every figure shows what it would buy at today's prices.
Inflation: The yearly rise in prices. At 2.5% a year, prices double in about 28 years.
Rolling correlation: The correlation measured over a moving window, such as the last 36 months, and measured again each month. It shows how the link between two holdings changed over time.