Mar 02, 2022

Interactive: Build Your Investment Portfolio

Hat tip to Scott and the folks at FinMango for this interactive tool that demonstrates the power of compounding as well as the varying returns based on different asset allocation models (% stocks vs. bonds)  

Here's the process that students will go through in using this tool:

  1. Input an initial investment account (e.g., $100)
  2. Select starting and end dates (e.g., I chose a date about 10 years ago): Students could choose their birth date to see how investments have performed in their lifetime.
  3. Select one of 4 investment portfolios (e.g., I chose 100% stocks)
  4. Choose a rebalancing strategy, which is the frequency with which you will make adjustments to your portfolio to get back to the target asset allocation (e.g., annually; doesn't really matter if 100% stocks)
  5. Choose a dollar-cost averaging strategy or how often you plan to make new contributions to your portfolio and an amount (e.g., monthly and $100 per month)
  6. Before seeing the results, you are reminded of the risks that come with any investing strategy.
  7. Here are the results, based on the assumptions above:

 

NOTE: SPY represents the return of the S&P 500

Questions for students: 

  1. Over the past 10 years there was one very significant drop in the stock market. Roughly how much did it drop (%age), when did it occur and what do you think caused it? 
  2. Based on what you learned about investment risk, which portfolio do you think is higher risk: 100% stocks or 80% stocks and 20% bonds. Explain your answer. 
  3. What is the typical relationship between risk and return when it comes to investing? 
  4. Try the various asset allocation choices (mix between stocks, bonds and international stocks). Which of the four allocation choices had the highest return over a 10 year period? Does the answer change if you look only at the past five years? 

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Looking for more interactives? NGPF has an Interactive Library AND interactives featured on the blog

 

 

 

 

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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