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Team Cocco Financial Planning

Modern Portfolio Theory Visualizer

Markowitz mean-variance optimization — plot the efficient frontier, find the max-Sharpe tangency portfolio, and see how diversification reduces risk for a given expected return.

Capital Market Assumptions

Asset Class Allocation
Total Allocation: 100%
Market Parameters
%

Sample Portfolios

Efficient Frontier · Risk vs. Return
Plot of all possible 2-asset stock/bond mixes — points on the curve are optimal for their risk level.
Expected Return
—
Weighted
Std Deviation
—
Portfolio risk
Sharpe Ratio
—
Risk-adjusted
Best Year (+2σ)
—
~97.5th pct
Worst Year (−2σ)
—
~2.5th pct

Diversification Benefit

—

Risk-Adjusted Return

—

25-Year Compounded Outcome — $100,000 invested

Pessimistic (−1σ)
—
Expected (mean)
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Optimistic (+1σ)
—
Reading the Efficient Frontier:
  • Risk (x-axis) = standard deviation of annual returns. Higher = more volatility.
  • Return (y-axis) = expected annualized return. Higher is better.
  • The curve is the efficient frontier — every point shows the MAX return possible for that level of risk.
  • The star is the tangency portfolio — the mix with the highest Sharpe ratio (best return per unit of risk).
  • The line from the risk-free rate to the star is the Capital Allocation Line — combining cash with the tangency portfolio dominates any portfolio below it.
  • Your orange dot shows where your current allocation falls. If it's below the curve, a more efficient mix exists at the same risk level.
Modern Portfolio Theory analysis prepared by Nate Cocco, ChFC · Series 65/7/6. Markowitz mean-variance optimization assumes returns are normally distributed and correlations are stable — both assumptions break down in tail events. Use as one input, not the only input.