Ted Aronson is an asset manager. His family taxable account portfolio has been featured and tracked by MarketWatch.com's lazy portfolios, maintained by Paul Farrel. The lazy portfolio has done very well prior to 2008-2009 crash.
The portfolio consists of the following index funds and their ETF substitutes:
- 20% in Vanguard Emerging Markets Stock Index (VEIEX) --- ETF: VWO
- 15% in Vanguard 500 Index (VFINX) --- ETF: VOO
- 15% in Vanguard Pacific Stock Index (VPACX) -- ETF: VPL
- 10% in Vanguard Extended Market Index (VEXMX) -- ETF: VXF
- 10% in Vanguard Inflation-Protected Securities (VIPSX) -- ETF: TIP
- 5% in Vanguard European Stock Index (VEURX) --- ETF: VGK
- 5% in Vanguard High-Yield Corporate (VWEHX) --- ETF: JNK
- 5% in Vanguard Long-Term U.S. Treasury (VUSTX) -- ETF: VGLT
- 5% in Vanguard Small Cap Growth (VISGX) --- ETF: VBK
- 5% in Vanguard Small Cap Value Index (VISVX) --- ETF: VBR
- 5% in Vanguard Total Stock Market Index (VTSMX) --- ETF: VTI
Asset Class | Ticker | Name |
---|---|---|
DIVERSIFIED EMERGING MKTS | VWO | Vanguard Emerging Markets Stock ETF |
LARGE BLEND | VOO | Vanguard S&P 500 ETF |
DIVERSIFIED PACIFIC/ASIA | VPL | Vanguard Pacific Stock ETF |
MID-CAP BLEND | VXF | Vanguard Extended Market Index ETF |
Inflation-Protected Bond | TIP | iShares Barclays TIPS Bond |
EUROPE STOCK | VGK | Vanguard European ETF |
High Yield Bond | JNK | SPDR Barclays Capital High Yield Bond |
LONG GOVERNMENT | VGLT | Vanguard Long-Term Govt Bd Idx ETF |
Small Growth | VBK | Vanguard Small Cap Growth ETF |
SMALL VALUE | VBR | Vanguard Small Cap Value ETF |
LARGE BLEND | VTI | Vanguard Total Stock Market ETF |
'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'
Applying this definition to our asset in some examples:'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'
Using this definition on our asset we see for example:'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'
Which means for our asset as example:'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'
Applying this definition to our asset in some examples:'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'
Applying this definition to our asset in some examples:'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'
Applying this definition to our asset in some examples:'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'
Using this definition on our asset we see for example:'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'
Using this definition on our asset we see for example:'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'
Applying this definition to our asset in some examples:'The Average Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'
Which means for our asset as example: