Enter the value of investments in a particular sector and the total value of the portfolio into the calculator to determine the sector allocation. This calculator can also evaluate any of the variables given the others are known.
Portfolio Sector Allocation Formula
The following formula is used to calculate the sector allocation in a portfolio.
SA = (V / TV) * 100
Variables:
- SA is the sector allocation (%)
- V is the value of investments in a particular sector ($)
- TV is the total value of the portfolio ($)
To calculate the sector allocation, divide the value of investments in a particular sector by the total value of the portfolio. Multiply the result by 100 to get the sector allocation in percentage.
What is a Portfolio Sector Allocation?
Portfolio Sector Allocation is an investment strategy that involves dividing an investment portfolio across various sectors of the economy to reduce risk and increase potential returns. This strategy aims to take advantage of the fact that different sectors of the economy perform differently under different market conditions. By investing in a diverse range of sectors, investors can potentially protect themselves from downturns in any one sector and increase their chances of achieving a positive return on their investments.
How to Calculate Portfolio Sector Allocation?
The following steps outline how to calculate the Portfolio Sector Allocation.
- First, determine the value of investments in a particular sector ($).
- Next, determine the total value of the portfolio ($).
- Next, gather the formula from above = SA = (V / TV) * 100.
- Finally, calculate the Portfolio Sector Allocation.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
sector allocation (%) = 25
value of investments in a particular sector ($) = 5000
total value of the portfolio ($) = 20000
