Asset Allocation Calculator
What an equity and fixed income mix earns, and what it costs in volatility.
- Equity
- 60.00%
- Fixed income
- 40.00%
- Blended return, before inflation
- 10.00%
- Years to double your purchasing power
- 19.1 years
- Real return, after inflation
- 3.77%
- Equity
- 60%
- Fixed income
- 40%
The blended return is simply the weighted average of what each side is expected to earn, so the only real decision here is the equity share. The two figures beside it are the ones worth sitting with. The real return uses the Fisher relation rather than subtracting inflation, because subtraction overstates it — a 10% blend against 6% inflation is 3.77% real, not 4%, and that gap compounds. And the fall to expect is SEBI's own rule of thumb: an X% equity allocation implies the portfolio can drop roughly X% from a peak at some point. That is not a forecast of when, it is the price of the return. A mix you would abandon partway through the fall earns the fall without the return, which is why the honest question is not which allocation earns most but which one you would actually hold through the worst of it.
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Independent · No commissions · No fund-house data — how the numbers are computed
How it works
This calculator takes the one decision that drives most of a portfolio's outcome — how much sits in equity — and shows what it earns and what it risks. Enter the equity share and the returns you expect from equity and from fixed income, and it reports the blended return, what that leaves after inflation, and the fall the mix implies.
The defaults are 60% equity at 12% p.a. against 40% fixed income at 7% p.a. post-tax, with 6% inflation. That blend returns 10% before inflation and 3.77% after it, and doubles your purchasing power in about 19 years. Use the post-tax fixed income return, not the headline rate: interest on deposits is taxed at slab every year, which is a large part of why the two sides differ.
The real return uses the Fisher relation rather than subtracting inflation from the return. The subtraction is a shortcut that overstates the answer — 10% against 6% inflation is 3.77% real, not 4% — and over a thirty-year horizon that difference is years of progress, not a rounding detail.
The fall to expect is SEBI's own rule of thumb: a portfolio with X% in equity can drop roughly X% from a peak at some point in its life. It is not a prediction of when. It is the price of the return, and it is the number to test yourself against, because a mix abandoned partway through a fall collects the fall without the recovery.
Blended return = w x equity return + (1 - w) x fixed income return; real return = (1 + blended) / (1 + inflation) - 1w is the equity weight. The blend is a plain weighted average; the real return divides rather than subtracts, because inflation erodes the grown amount, not the starting one.
Frequently asked questions
How is a blended portfolio return calculated?
A blended portfolio return is the weighted average of the expected returns of each asset class, weighted by how much of the portfolio sits in each. A portfolio 60% in equity expected to return 12% and 40% in fixed income expected to return 7% has a blended expected return of 0.6 x 12 + 0.4 x 7, which is 10%. It is an expectation under assumed rates, not a projection of any single year.
Why subtract inflation using division rather than subtraction?
Inflation erodes the amount after it has grown, not the amount you started with, so the correct relation is (1 + nominal) divided by (1 + inflation), minus 1 — the Fisher relation. Subtracting gives a number that is always slightly too high: a 10% return against 6% inflation is 3.77% in real terms, not 4%. The gap widens as both rates rise, and it compounds over a long horizon.
How much can a portfolio fall for a given equity allocation?
A common rule of thumb, used in SEBI's own investor education material, is that a portfolio with X% in equity should be expected to fall roughly X% from a peak to a trough at some point. A 60% equity portfolio implies a drawdown of around 60% in a severe market fall. It is a planning heuristic rather than a measured limit, and its purpose is to test whether you would hold the allocation through that fall rather than sell into it.
Should asset allocation be decided by age?
Age-based rules such as holding your age in fixed income are convenient but incomplete, because they ignore how far away the money is needed, how stable your income is, and how you have actually behaved in past falls. Time horizon matters more than age: money needed in three years does not belong in equity regardless of how old you are, and money not needed for thirty years can carry equity risk at any age.
Go further
Work out what you actually hold before deciding how to split it.
Feed the blended return in as the expected return for a dated goal.
How to hold a target mix once markets start moving it.
Whether shifting the mix with the market is worth attempting.
One common way to structure the equity side of the split.