Efficient Frontier & Rebalancing Bonus
Builds the Markowitz efficient frontier for a small set of assets from your expected returns, volatilities and pairwise correlations. It samples 2000 random long-only portfolios to show the cloud of possibilities, traces the frontier of minimum-risk portfolios along it, and solves for the two classic corner portfolios: minimum variance and maximum Sharpe ratio (best excess return per unit of risk above your risk-free rate). It also estimates the “rebalancing bonus” — the extra geometric return an equal-weight, regularly rebalanced mix earns over the average of its parts, roughly half the variance you diversify away.
Read the full guide to this tool
Results
Notes
- The frontier is only as good as its inputs — expected returns are guesses, and small changes in them move the optimal weights a lot.
- Low or negative correlation is the free lunch: it lets the portfolio be calmer than any of its parts.
- The rebalancing bonus ≈ (average variance − portfolio variance) / 2 — harvesting it requires actually selling winners to buy losers on a schedule.
- Long-only weights are assumed; with short selling the frontier extends further but the math and the risks change.
- This is an educational estimate, not financial advice; talk to a qualified adviser before making money decisions.
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