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Portfolio Backtesting Visualizer
Portfolio Backtesting Visualizer
Ending Balance (2010)
$1,067,342.23
Backtest Analysis
From 1980 to 2010, this 60/35 portfolio grew your $190,000 of contributions to $1,067,342.23 — a 5.9% annualized return with a maximum drawdown of 19.7%. Its worst year was 2008 (-20.2%), and the same period's best was 1995 (29.2%).
*Returns are approximate calendar-year total returns for US large-cap stocks and investment-grade bonds, 1976-2024, and assume annual rebalancing with no taxes, fees, or transaction costs. Past results do not predict future returns. Educational only, not investment advice.
Seeing How a Real Portfolio Actually Behaved
A backtest shows how a specific asset allocation would have performed historically over a chosen period — the single most instructive exercise available to a retail investor. Instead of assuming a smooth 8% every year, backtesting applies the actual calendar-year returns of US stocks and bonds, warts and all: the 1980s bull market, the 2000-02 collapse, the -37% stock year of 2008, and the violent 2020 rebound. It is the difference between reading about drawdowns in a textbook and watching your own chosen mix lose a third of its value on paper. For American investors, this matters because the standard planning assumption of constant average returns dramatically overstates what most investors actually experience. Research on investor behavior consistently shows that people underperform their own funds because they sell during panics and buy during euphoria. A backtest that exposes the worst year and deepest drawdown prepares you psychologically for those moments — which is the primary reason portfolios get abandoned. By running your allocation through history from different starting years, this tool replaces guesswork with evidence: what did this mix actually earn, and how much pain did it actually inflict along the way.
Replaying History Year by Year
The engine works year by year. For each calendar year in your chosen window, the portfolio return is the weighted blend of that year's stock and bond returns: Portfolio Return = Stock Weight × Stock Return + Bond Weight × Bond Return + Cash Weight × Cash Return. The model uses approximate calendar-year total returns of a US large-cap stock index and an investment-grade bond index from 1976 through 2024, with cash at a flat 3%. Each year the balance grows by that blended return, and monthly contributions are added across the year. After each year the tracker records the peak balance and the largest gap between the current balance and that peak — the maximum drawdown. It also logs the worst and best calendar years. The ending balance is compared against total money invested (initial + contributions) to produce an annualized money-weighted return. Because the calculation replays actual historical sequences, the same allocation shows very different outcomes from different starting years — 1980 versus 2000, for example — which is exactly the lesson the exercise is designed to teach.
Expert Insights
The Starting Year Teaches the Most Important Lesson
Run your allocation from 1980, from 2000, and from 2007. The spread in results across these start dates illustrates why no average return is a promise: sequence matters as much as asset selection. If your plan only survives history's friendly stretches, it is not a plan yet.
Judge Backtests by Drawdown, Not CAGR
Every allocation looks great until you ask what it did in 2008-09. The maximum drawdown is the number that determines whether you stay invested. A portfolio that earned 9% annually but lost 45% along the way is a trap for anyone without a decade of emotional stamina to match.
Assume Rebalancing; Question Everything Else
This model applies annual rebalancing between stocks and bonds, which historically captured some free lunch from mean reversion. It assumes no taxes, no fees, and instant rebalancing, so treat outputs as optimistic by the drag of real-world costs. Still, relative comparisons between allocations remain honest and useful.
Actionable Tips
- 1
Test the Allocation You Actually Own
Start with your real mix and real dollar amounts rather than a hypothetical. The emotional weight of seeing your actual allocation lose 20% in a bad historical year is what makes the exercise valuable. If you cannot watch the drawdown, lower the equity weight before the market forces the lesson.
- 2
Run Three Start Years Before Deciding
A single backtest is cherry-picked by the calendar. Run your candidate allocation from at least three starting points spanning a bear market, a bull market, and a sideways decade. Choose the allocation whose worst-case sequence you can still hold — that is the real test of a plan.
- 3
Use Contributions to Change the Math
Notice how monthly contributions soften bad sequences: adding money during a downturn means buying cheap shares, which accelerates recovery. During accumulation years, a bear market is mathematically helpful to a contributor. This reframes the drawdowns you see here from disasters to discounted entry points.
Real-World Examples
Nadia Picked Her Mix From Three Start Years
Nadia wanted an 80/20 portfolio but ran it from 1990, 2000, and 2008. The 2000 start — entering a market peak — showed her a four-year stretch of no progress. She chose 70/30 instead, accepting slightly lower expected return for a sequence she knew she would not panic through.
Derek's 60/40 Backtest Changed His Mind Twice
Derek backtested a classic 60/40 with $500 monthly contributions starting 2007, the absolute worst recent entry point. The portfolio recovered fully by 2012 and finished strongly by 2024. Seeing the numbers, he stopped timing the market, started his contributions immediately, and left them running.
Aisha Used Backtests to Hold Through 2022
When stocks fell nearly 20% and bonds fell 13% in 2022, Aisha was ready to sell everything. She pulled up her own backtest, which included the 2008 sequence — far worse — and saw how every prior deep drawdown had eventually recovered. She stayed invested and let the 2023-24 rebound repair her balance.
Glossary of Terms
- Backtest
- Simulating how a portfolio allocation would have performed using actual historical returns over a chosen period.
- Maximum Drawdown
- The largest peak-to-trough decline a portfolio experiences before reaching a new high; the standard measure of worst-case pain.
- Rebalancing
- Periodically buying or selling assets to return a portfolio to its target allocation weights.
Frequently Asked Questions
Everything you need to know about this topic.
Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the US tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.