Plot the efficient frontier for any mix of stocks, bonds, and cash. Find the highest-return portfolio for your risk tolerance, or the lowest-risk portfolio for your target return. Includes 13 model portfolios.
The Efficient Frontier is the foundational concept of Modern Portfolio Theory: for any given level of risk (standard deviation), there's an optimal portfolio allocation that produces the highest expected return. Allocations below the frontier are suboptimal — you can get the same return with less risk, or more return with the same risk. Most retail portfolios are below the frontier because they're over-concentrated in cash, single stocks, or recently-popular assets.
This calculator plots the efficient frontier for a 3-asset portfolio: US stocks (proxy: VTI total market), US bonds (proxy: BND total bond), and cash (proxy: SGOV / money market). You set the expected return and standard deviation for each asset (defaults are long-run historical averages: stocks 7% / 17% σ, bonds 4% / 5% σ, cash 4.5% / 0.5% σ), and the calculator computes the frontier across all allocation combinations.
Output: the frontier curve (risk on x-axis, return on y-axis), your current allocation plotted as a marker, the optimal allocation for your stated risk tolerance, and 13 named model portfolios (60/40 classic, Bogleheads three-fund, all-weather, target-date glide paths, etc.) plotted for comparison.
Real-world caveat: the frontier is mathematically optimal for the expected return / standard deviation inputs you provide. Historical averages don't guarantee future returns, and the standard deviation assumption is highly sensitive to time-window choice. Treat the frontier as a directional guide — not a precise prescription.
Step 1 — Set asset class assumptions. Expected return and standard deviation for stocks, bonds, cash. Defaults are long-run US historical averages. For more conservative planning, lower stock return by 1-2% to reflect today's higher valuations.
Step 2 — Set your risk tolerance. Express as a target standard deviation (e.g. 10% σ for moderate, 15% for aggressive), or as a target return (e.g. 6% expected nominal return). The calculator finds the efficient allocation for either input.
Step 3 — Plot your current allocation. Enter your current stock/bond/ cash split. The calculator shows where you sit on the frontier (above = lucky, below = sub-optimal). Most retail portfolios sit 1-2% below the frontier due to cash drag or single-stock concentration.
Set your target return or risk tolerance. The calculator shows the efficient frontier curve, your optimal stock/bond/cash mix, and the 13 model portfolios for visual comparison.
Open the calculator →The curve plotting maximum expected return at each level of risk (standard deviation), for all possible portfolio allocations across a set of assets. Portfolios ON the frontier are 'efficient' — you can't get more return without taking more risk. Portfolios BELOW the frontier are inefficient — you could rebalance to get the same return with less risk. Modern Portfolio Theory (Markowitz, 1952) established this concept; it remains the foundation of asset allocation.
Depends on your risk tolerance. Classic answers: age-based (own your age in bonds → 30% bonds at age 30, 70% at age 70). Bogleheads three-fund: 60/40 stocks/bonds is a common moderate-risk benchmark. All-Weather (Ray Dalio): 30/55/15 stocks/long bonds/intermediate bonds + 7.5% gold + 7.5% commodities. The efficient frontier shows that around 60/40 is at the 'sweet spot' of risk-adjusted return for most assumption sets — return-per-unit-of-risk peaks roughly there.
Three common reasons. (1) Cash drag — too much in money market or savings, which has very low expected return. (2) Single-stock concentration — owning one or two companies (often employer stock) at >10% of portfolio adds idiosyncratic risk without expected return premium. (3) Untaxable rebalancing — sticking with an old allocation because rebalancing would trigger capital gains, even when a different allocation would be more efficient (the calculator can show the tax-aware view).
Yes — asset location matters. Bonds and REITs generate ordinary-income distributions; they're more efficient in tax-deferred (401k, IRA). Stocks (especially index funds) have low turnover and qualified dividend treatment; they're more efficient in taxable. A tax-optimized portfolio puts bonds in 401k and stocks in taxable, even if the AGGREGATE allocation is 60/40, because the after-tax efficient frontier differs from the pre-tax one. The calculator has a 'tax location' toggle.