Fund and Bond Blend
The blended return and end value of a fund-and-bond mix.
Enter your numbers
Example: 100000
Example: 12
Example: 50000
Example: 6
Example: 10
Recent
Formula
How the calculation works
A mixed portfolio is not one return; it is two sleeves growing at their own rates. On the example, 100,000 in a fund at 12% reaches 310,585 while 50,000 in bonds at 6% reaches 89,542, for 400,127 together and a gain of 250,127.
The blended rate of 10.31% sits between the two, nearer the fund because most of the money is there. That is the whole effect of the weights, and it is why the split matters as much as the rates.
Common mistakes
- Averaging the two rates as if the amounts were equal. That gives 9%, but the real blended rate is 10.31% because the fund holds twice the money.
- Treating bonds as a drag to be removed. They lower the average return, but they also lower the fall in a bad year, which is the reason to hold them.
When to use it
- Use it when choosing a split between a growth fund and bonds, to see the end value and the blended rate the split produces.
- It compounds each sleeve at a steady rate and ignores fees and tax, both of which cut the end value. Use it to compare splits, not to predict a balance.
Worked example
100,000 in a fund at 12% and 50,000 in bonds at 6% over 10 years: 400,127 at the end, 250,127 gain, a blended 10.31%.
Common questions
Why is the blended rate not a simple average?
Because the two sides are not equal amounts. The larger sleeve's return carries more weight.
Why hold bonds at all?
Bonds usually move less, so they soften a bad market -- at the cost of a lower average return.
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