What Is the Expected Return on a Market Portfolio?

What Is the Expected Return on a Market Portfolio?

The expected return on a market portfolio is the same as the expected return on the market as a whole, according to Investopedia. A market portfolio assumes that a person has all of the same stocks in the same percentage as the entire market.

A market portfolio is diversified, so it has only the risks that the entire market has, which means systematic risks. It does not have risk associated with one particular stock or set of stocks.

Boundless explains that one method of calculating the expected return on a portfolio is the weighted-average method. This method takes the expected return on an individual asset and multiplies it by the asset's percentage of the total portfolio. Add all of the weighted expected returns together to get the expected return on the portfolio.