Explore the Risk-Return Tradeoff

The Model

This tool plots 61 investments on a risk-return scatter chart using historical data — covering asset classes, major market indices, S&P 500 sectors, factor strategies, and country ETFs. The vertical axis shows average annualized return. The horizontal axis shows one of three user-selectable risk measures: volatility (standard deviation of annual returns), max drawdown (worst peak-to-trough loss), or illiquidity (a 1–10 scale reflecting typical lock-up periods and redemption constraints).

Click any asset to view detailed statistics and a growth-of-$10,000 performance chart showing historical price performance over the selected time period. Switch between periods (1M to Max) to see how returns and risk measures change across different horizons.

Risk Measures Explained

• Volatility (Std Dev): Standard deviation of annual returns. Higher values mean wider swings. Note: private market volatility is understated due to infrequent, appraised valuations.
• Max Drawdown: The largest peak-to-trough decline in the historical record. Shows worst-case loss experience. Drawdowns of 50%+ require 100%+ gains to recover.
• Illiquidity (1–10): A qualitative scale. 1 = instant access (cash, money markets), 2 = daily-traded public markets, 3–4 = less liquid public markets, 5–7 = limited liquidity with redemption gates, 8–10 = multi-year lock-ups (PE, VC).

Other Key Metrics

• Average return: When period is “Max”, this is the annualized nominal return over the full historical period (source varies by asset). For all other periods, this is the trailing return computed from monthly-adjusted ETF price history sourced from Alpha Vantage (primary) or Yahoo Finance (fallback). Assets lacking period-specific data (e.g. PE/VC) show their long-run average regardless of period selected and are marked with *.
• Sharpe ratio: Risk-adjusted return, calculated as (return − risk-free rate) / volatility. Higher is better — a Sharpe above 0.5 is generally considered good, above 1.0 is excellent. Uses the long-term T-bill average (3.2%) as the risk-free rate.
• Best/Worst year: Highest and lowest single calendar-year returns, showing the range of outcomes

Data Sources — Asset Classes

• US Large Cap: S&P 500 Total Return Index, 1926–2024 (Ibbotson / Morningstar SBBI Yearbook)
• US Small Cap: Ibbotson Small Company Stocks series, 1926–2024 (Morningstar SBBI)
• International Developed: MSCI EAFE Net Return Index, 1970–2024 (MSCI)
• Emerging Markets: MSCI Emerging Markets Net Return Index, 1988–2024 (MSCI)
• Short-Term Bonds: Ibbotson US Short-Term Government Bonds, 1926–2024 (Morningstar SBBI)
• Intermediate-Term Bonds: Ibbotson Intermediate-Term Government Bonds, 1926–2024 (Morningstar SBBI)
• US Aggregate Bonds: Bloomberg US Aggregate Bond Index, 1976–2024 (Bloomberg)
• Long-Term Treasuries: Ibbotson Long-Term Government Bonds, 1926–2024 (Morningstar SBBI)
• Corporate Bonds (IG): Bloomberg US Corporate Bond Index, 1973–2024 (Bloomberg)
• High Yield Bonds: ICE BofA US High Yield Index, 1987–2024 (ICE Data Indices)
• REITs: FTSE NAREIT All Equity REITs Total Return Index, 1972–2024 (FTSE Russell / Nareit)
• Commodities: Bloomberg Commodity Total Return Index, 1991–2024 (Bloomberg)
• Private Equity: Cambridge Associates US Private Equity / Buyout Index, 1986–2024 (Cambridge Associates)
• Venture Capital: Cambridge Associates US Venture Capital Index, 1981–present (Cambridge Associates)
• Private Credit: SPDR Blackstone Senior Loan ETF (SRLN), 2013–present (ETF proxy for private credit)
• Hedge Fund: IQ Hedge Multi-Strategy Tracker ETF (QAI), 2009–present (ETF proxy for hedge funds)
• Cash: SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)

Data Sources — Indices

• S&P 500: S&P 500 Total Return Index, 1957–2024 (S&P Dow Jones Indices)
• Dow Jones: Dow Jones Industrial Average, 1896–2024 (S&P Dow Jones Indices)
• Nasdaq Composite: Nasdaq Composite Total Return, 1971–2024 (Nasdaq)
• Russell 1000: Russell 1000 Total Return Index, 1984–2024 (FTSE Russell)
• Russell 2000: Russell 2000 Total Return Index, 1984–2024 (FTSE Russell)
• MSCI World: MSCI World Net Return Index, 1970–2024 (MSCI)

Data Sources — S&P 500 Sectors

All 11 GICS sectors use S&P 500 sector total return indices, 1990–2024 (S&P Dow Jones Indices). Real Estate sector data begins 2001.

Data Sources — Countries

Country ETFs from iShares MSCI series: Japan (EWJ), United Kingdom (EWU), Germany (EWG), Canada (EWC), Australia (EWA), Switzerland (EWL), China (MCHI), India (INDA), Brazil (EWZ), South Korea (EWY), Taiwan (EWT), Mexico (EWW).

Data Sources — Factor Strategies

• Value: iShares MSCI USA Value Factor ETF (VLUE), inception 2013
• Growth: Vanguard Growth ETF (VUG), inception 2004
• Momentum: iShares MSCI USA Momentum Factor ETF (MTUM), inception 2013
• Quality: iShares MSCI USA Quality Factor ETF (QUAL), inception 2013
• Low Volatility: iShares MSCI USA Min Vol Factor ETF (USMV), inception 2011
• High Dividend: Vanguard High Dividend Yield ETF (VYM), inception 2006
• Dividend Growth: Schwab US Dividend Equity ETF (SCHD), inception 2011
• Equal Weight: Invesco S&P 500 Equal Weight ETF (RSP), inception 2003
• Size (Small Cap): iShares MSCI USA Size Factor ETF (SIZE), inception 2013
• High Beta: Invesco S&P 500 High Beta ETF (SPHB), inception 2011

Assumptions & Limitations

• Data is refreshed monthly from Alpha Vantage (primary) with Yahoo Finance as fallback for ETF-based assets, and Cambridge Associates for PE/VC benchmarks. The “Data through” badge shows the last refresh date.
• Private Credit and Hedge Fund use liquid ETF proxies (SRLN, QAI) which may not fully represent the characteristics of institutional-grade private credit or hedge fund allocations
• Returns are nominal (not inflation-adjusted) and represent index-level results before fees and taxes
• Historical periods differ by asset class; cross-class comparisons should be interpreted with care
• Private equity and VC data reflects pooled, net-of-fee fund returns; individual fund results vary widely by quartile and vintage year
• PE/VC volatility is based on quarterly appraisal-based valuations and substantially understates true economic risk
• Illiquidity scores are qualitative assessments by Rubric Advisors, not derived from a single quantitative model
• Correlations between asset classes (key to diversification benefit) are not shown in this view
• Past performance does not guarantee future results

Tips for Using This Tool

• Switch between the three risk measures to see how asset classes re-rank — Private Equity looks low-risk on volatility but high-risk on illiquidity
• Use the category filters to compare within a group (e.g., all equities or all fixed income)
• Pay attention to max drawdown — a 50%+ decline requires a 100%+ gain to recover
• The best portfolios combine assets that do not move in lockstep, which is why diversification across categories matters
• Your ideal allocation depends on your time horizon, income needs, and how much short-term loss you can tolerate