Compare portfolios

The table below compare the performance of all our strategies between end-2005 and end-2012 (7 years).


Model Conservative Retirement Aggressive Platinum Benchmark
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CAGR +12.3% +13.3% +24.3% +24.2% +6.2%
Volatility 8.4% 6.8% 16.6% 12.0% 7.9%
Ulcer Index 7.75% 3.66% 31.56% 14.95% 101.11%
Drawdown -5.5% -4.1% -11.0% -7.5% -23.12%
Sharpe Ratio 1.07 1.48 1.21 1.64 0.40
Sortino Ratio 0.87 1.23 0.89 1.46 0.30
Worst 12-month -3.12% +3.93% -8.26% -6.80% -21.11%
Worst 6-month -4.28% -0.22% -6.73% -3.67% -20.34%
Worst month -4.13% -4.10% -7.42% -4.10% -8.69%
Positive months 66.7% 72.6% 67.9% 67.9% 66.7%

Want to see the same metrics for leveraged portfolios or for a mix of the platinum and retirement portfolios? Click here.

Notes: All the calculations are made based on monthly returns. Volatility is the annualized standard deviation of monthly returns and Max drawdown is the maximum monthly drawdown. Our strategies are absolute return strategies and do not try to beat a particular benchmark. For illustration purposes, we show the performance of a simple two-ETF portfolio benchmark: 50% SPY (U.S. Equities) and IEF (Medium-Term U.S. Treasuries)


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The Platinum Portfolio significantly beats the other portfolios whatever the risk metric is in the table above. Nevertheless, these metrics are also extremely better for any of our portfolio than for the benchmark. Note that this benchmark is tradionally considered as a conservative asset allocation.

  • The Sharpe Ratio is a standard ratio to measure the risk-adjusted performance of a portfolio. The higher the better. Construction: divide the performance of the portfolio relative to the risk-free asset by the standard deviation of these differences. Here we use the monthly performance of SHY as a proxy for the risk-free return.
  • The Sortino Ratio only takes into accound downside deviation relative to a pre-set rate of return. The higher the better. It is based on the idea that when measuring risk, only downside volatility matters. Construction: we measure downside volatility compared to a 0.25% monthly return, which is the average monthly return needed to achieve a 3% annual return. We choose this as if we assume long term inflation to be around 3%, this return is the minimum return required to preserve the purchase power of your capital.
  • The Ulcer Index is a measure of the depth and duration of drawdowns in prices from earlier highs. Using the Ulcer index instead of the standard deviation can lead to different conclusions about investment risk and risk-adjusted return. Of course, the lower the better.

Notice how the Platinum Portfolio achieves overall returns similar to the aggressive portfolio but with a much smoother equity curve, i.e. lower volatility and smaller drawdowns. Hence the Platinum Portfolio is easier to implement as its more consistent performance makes you less prone to emotions. Furthermore, a lower volatility increases the likelihood of stronger compounded returns in the long run.

 

Another way to have a visual look at the risk incurred by the two strategies is to check the depth, length and frequency of the drawdowns: