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Recover the original allocation
The fictional portfolio starts at 60/40 and earns asset returns 10% and −5%. Its gain is 4, giving return 4%. Ending values are 66 and 38, which change the allocation proportions.
Apply the wrong-date weights to expose the error
Using ending weights 66/104 and 38/104 with the earlier asset rates gives approximately 4.519231%. That does not match the actual gain of 4 on initial capital 100. It gives greater retrospective weight to the winning asset.
| Weights used | Weighted rate | Matches actual gain? |
|---|---|---|
| Starting 60/40 | 4% | Yes |
| Ending 66/104 and 38/104 | 4.519231% | No |
Use ending weights for their proper role
If the portfolio continues without rebalancing, those ending proportions can be the next period’s starting weights. Applying them to next-period asset returns is a different calculation with a new interval.
Reconcile amounts before trusting percentages
Compute the individual currency gains and total starting value. Their ratio provides a check independent of the selected weight column. A column labeled weights without a date is incomplete evidence for the aggregation.