What is the Portfolio Risk Calculator?
A portfolio risk calculator measures how risky your overall mix of investments is, based purely on how you have spread your money across asset classes such as equity, debt, gold, real estate and cash. It turns your allocation into a single risk score and a diversification score so you can see, at a glance, whether your portfolio matches the level of risk you intend to take.
How does it work?
Each asset class is assigned a relative risk weight — equity is the most volatile, cash the least. The calculator takes the weighted average of these risk weights using your allocation to produce a 0–100 risk score, then classifies it as Low, Moderate, High or Very High. Diversification is measured from how evenly your money is spread across classes: the more concentrated the portfolio, the lower the score. Finally, it flags concentration, excess cash and other common issues as recommendations.
Formula
Risk Score = Σ (Weightᵢ × Risk Weightᵢ) ÷ Σ Weightᵢ
- Weightᵢ = percentage allocated to asset class i
- Risk Weightᵢ = relative volatility of asset class i (0–100)
- Σ = sum across all asset classes
Example calculation
A portfolio of 50% equity, 25% debt, 10% gold, 5% real estate and 10% cash produces a weighted risk score in the “Moderate” band, with equity contributing the largest share of total risk. Because the money is spread across five classes, the diversification score is high — but shifting 70% into equity would push both the risk score and equity’s risk contribution sharply higher.
Benefits
- Translates an abstract allocation into a clear risk and diversification score.
- Shows which asset class contributes the most to your overall risk.
- Highlights over-concentration and excess cash with plain recommendations.
- Works entirely from manual inputs — no account linking or data sharing.
Limitations
- Uses relative risk weights, not live volatility or correlations between assets.
- Treats each asset class as a single block, ignoring quality differences within it.
- Is an educational guide, not personalised investment advice.
Conclusion
Knowing your portfolio’s risk level is the first step to aligning it with your goals and temperament. Use this calculator to sanity-check your allocation, rebalance when one asset class dominates, and keep your diversification healthy over time.