Understanding Expected Investment Return (EIR)

EIR stands for "Expected Investment Return" and it is a financial metric used to estimate the expected return on an investment portfolio. It takes into account the expected returns from each asset class in the portfolio, as well as the risk associated with each asset class. The EIR is calculated by weighting the expected returns of each asset class by their respective weights in the portfolio, and then adding up the weighted expected returns.

For example, if a portfolio has a 60% allocation to stocks and a 40% allocation to bonds, the EIR would be the weighted average of the expected returns for stocks and bonds. If the expected return for stocks is 8% and the expected return for bonds is 4%, the EIR would be:

EIR = (0.6 x 8%) + (0.4 x 4%) = 12%

This means that the portfolio is expected to return 12% on an annual basis, based on the weighted average of the expected returns for each asset class. The EIR can be used as a benchmark to evaluate the performance of the portfolio and to make decisions about rebalancing the portfolio.