Tip: drag the purple start-date handle on the chart to scrub the start date — the chart's view stays put so you can see history before and after the chosen date. Use the zoom bar below the chart to change just the visible range, or the date pickers and range pills to pick a specific backtest window.
Source: Kenneth R. French Data Library — the broad U.S. stock market total return, calculated from the Fama/French monthly research factors as Mkt-RF plus RF (dividends included). The bond portion uses the 10-Year U.S. Treasury yield as a benchmark proxy for high-quality bonds in general (treasuries, investment-grade corporates, municipals). Hypothetical illustration for teaching only.
| Year-end | Cash | Bonds | Stocks | Total | Annual return |
|---|---|---|---|---|---|
| Pick a window above to see results. | |||||
Values shown at the last trading day of each calendar year inside your selected window. Annual return is the change in total portfolio value from one year-end to the next.
| Year-end | Conservative | Moderate | Aggressive | Custom |
|---|---|---|---|---|
| Pick a window above to see results. | ||||
Each column shows the total portfolio value for that strategy at the last trading day of each calendar year inside your selected window.
What is asset allocation?
Asset allocation is how you split your savings across different kinds of investments, called asset classes. This page uses three classic asset classes: cash, bonds, and stocks (represented here by the broad U.S. stock market). The donut chart in the inputs panel shows your current mix at a glance.
What "bonds" means on this page
A bond is a loan you make to a government or a company. They pay you interest along the way and return the original amount at the end. The "Bonds" line in this page's backtest uses the 10-Year U.S. Treasury yield as its benchmark — but think of it as a stand-in for any high-quality bond, not just treasuries.
Why the 10-Year Treasury? Because it's the cleanest, longest, and most reliable daily series available for free — a single number that has been measured every business day since 1962. It's also the reference rate the rest of the bond market quotes against. A high-quality (investment-grade) corporate bond, like one issued by Apple or Johnson & Johnson, typically yields a small spread above the 10-Year Treasury — say, 0.5% to 1.5% extra to compensate for the slightly higher risk that the company could default. Municipal bonds, mortgage-backed bonds, and other government bonds work the same way: they all move in step with treasury rates, with small differences for credit risk and tax treatment.
For this teaching backtest, the differences mostly wash out. Whether you're holding a portfolio of treasuries or investment-grade corporates, the long-run behavior — steady interest, modest year-to-year movement, a cushion when stocks fall — is similar. Treasuries are simply the easiest case to model cleanly.
Why three asset classes
Each class behaves differently. Cash barely moves — it sits in a savings or money-market account and earns a small amount of interest. Bonds pay a steady interest rate and only drift mildly in value. Stocks are an ownership stake in companies — they grow with the economy but can also drop sharply when markets get scared. When stocks fall hard, cash and bonds often hold their value, which is what makes the mix powerful.
How the backtest works
On the starting date, your initial dollars are split between cash, bonds, and stocks based on your target allocation. From there the page walks the data forward one month at a time. The stock portion changes by the same percentage as the broad U.S. stock market that month. The bond portion grows at the 10-year Treasury yield (compounded across the days in the month) — modeling holding a constantly-refreshed 10-year bond. The cash portion grows at a cash yield equal to the 10-Year Treasury yield minus 1.5 percentage points (floored at 0.25%) — a rough but realistic proxy for short-term rates that tracks the rate cycle. Interest on the cash and bond sides is automatically reinvested.
Compounding and reinvestment
Compounding is the most important idea in long-term investing. Whenever your money earns a return, that return is added to your balance — and the next return is earned on the new, bigger balance. The page reinvests every day, so a 5% return on a portfolio that's already up 30% builds on the 30%, not on the original amount.
What "rebalancing" actually does
Over time, the better-performing assets become a larger share of your portfolio. If stocks double while cash and bonds stay roughly flat, a 60/30/10 portfolio quietly drifts toward 75/20/5 — taking on more risk than you originally wanted. Rebalancing means selling a slice of the winners and buying a slice of the laggards to get back to your target. It forces a "sell high, buy low" discipline, and it caps how risky the portfolio is allowed to get.
Choosing a rebalance frequency
More frequent rebalancing keeps the mix tight to your target, but each rebalance involves trading. Annual rebalancing is a popular middle ground used by many advisors and target-date funds. Choosing Never shows how a buy-and-hold mix would have drifted — sometimes that drift helped, sometimes it hurt.
Why your start date matters so much
Try clicking Choose Random Date a few times. You'll see that the exact same allocation can produce very different ending values depending on whether you started in 1982, 1999, or 2008. This is called sequence-of-returns risk: short windows are dominated by luck, but as the window stretches across decades, those swings tend to even out.
Withdrawals and why the model isn't just "more stocks always wins"
Without withdrawals the answer is simple: more stocks, over a long enough window, always wins. That's not the question most people are actually asking. In real life you'll need money out of this portfolio at specific moments — for a car, a house, an emergency, or to pay your bills in retirement.
The Withdrawals card lets you put those events into the simulation. Each one-time withdrawal sells a slice of the portfolio on its date. Each recurring withdrawal does the same once per year between its start and end dates. The deduction comes proportionally from cash, bonds, and stocks based on what you currently hold — then the next rebalance (if any) puts you back on target.
This is where sequence-of-returns risk becomes vivid. A 100% stock portfolio that runs into the 2008 crash and is also forced to withdraw $40,000 that year sells a huge fraction of its shares at depressed prices. Those shares aren't around for the recovery. A 30/30/40 portfolio holding the same withdrawal sells far fewer stocks (it draws partly from cash and bonds), so when stocks recover, more of the principal participates. Across long retirement windows, the moderate mix can actually outlast the aggressive mix even though the aggressive mix would have ended higher with no withdrawals.
Watch for the red triangle markers along the top of the chart — those are your withdrawal dates. If a strategy can't cover a withdrawal, its tile turns red and shows "Depleted" with the date it ran out.
What the chart and table show
The four lines on the chart are the total portfolio, the stock portion, the bond portion, and the cash portion. The summary tiles report the ending dollar values for each, the total return over the whole window, and your three target allocation percentages. The year-by-year table lets you scan the values at each year-end and see how each annual change compares.
Things the model does not include
This is a teaching tool, so it keeps the math clean. The stock series here is the broad U.S. stock market from the Fama/French research data — a total-return series that already includes reinvested dividends. The bond side compounds the 10-Year Treasury yield, which is a useful proxy for holding a constantly-refreshed 10-year bond, but it does not capture price changes from rates rising or falling on a specific bond, nor the small extra yield ("credit spread") that corporate or municipal bonds typically pay above treasuries. The cash side uses a simple 10-year-minus-1.5% proxy, since we don't have a daily money-market series in the dataset. There are no taxes, fees, or inflation adjustments.
Common misconceptions
One myth is that "stocks always go up over 10 years." Long stretches often end higher, but not always — and the path can be ugly. Another myth is that cash and bonds are boring and useless. In a year like 2008, when stocks fell roughly 38%, holders of high-quality bonds barely lost a thing and cash holders barely noticed at all. That kind of cushion is exactly why the mix exists.
Key takeaway
The right mix is the one you can stick with through bad years. Use this page to see how different mixes would have actually behaved across real history — not just on paper. Adjust the sliders, slide the window, hit Random a few times, and notice how time, allocation, and rebalancing all interact. For real money decisions, talk to a qualified financial planner; this page is for learning only.