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

The Aronson Family Taxable ETF Lazy Portfolio consists of 11 funds.

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:- Compared with the benchmark SPY (74.4%) in the period of the last 5 years, the total return, or increase in value of 44.9% of Aronson Family Taxable Portfolio is smaller, thus worse.
- During the last 3 years, the total return, or performance is 19.1%, which is lower, thus worse than the value of 34.2% from the benchmark.

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Which means for our asset as example:- Compared with the benchmark SPY (11.8%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 7.7% of Aronson Family Taxable Portfolio is lower, thus worse.
- Compared with SPY (10.3%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 6% is smaller, thus worse.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Looking at the 30 days standard deviation of 11.7% in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (18.9%)
- During the last 3 years, the historical 30 days volatility is 13.6%, which is lower, thus better than the value of 22.6% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:- Looking at the downside volatility of 8.8% in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.8%)
- During the last 3 years, the downside risk is 10.5%, which is lower, thus better than the value of 16.7% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:- Compared with the benchmark SPY (0.49) in the period of the last 5 years, the Sharpe Ratio of 0.44 of Aronson Family Taxable Portfolio is lower, thus worse.
- During the last 3 years, the Sharpe Ratio is 0.26, which is smaller, thus worse than the value of 0.35 from the benchmark.

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:- Looking at the ratio of annual return and downside deviation of 0.59 in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (0.67)
- During the last 3 years, the excess return divided by the downside deviation is 0.34, which is lower, thus worse than the value of 0.47 from the benchmark.

'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:- Looking at the Ulcer Ratio of 4.61 in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively smaller, thus better in comparison to the benchmark SPY (5.82 )
- Looking at Downside risk index in of 5.54 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (7.13 ).

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:- Looking at the maximum DrawDown of -24.3 days in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum reduction from previous high of -24.3 days is higher, thus better.

'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 maximum days under water over 5 years of Aronson Family Taxable Portfolio is 350 days, which is greater, thus worse compared to the benchmark SPY (139 days) in the same period.
- Compared with SPY (139 days) in the period of the last 3 years, the maximum days under water of 350 days is greater, thus worse.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (37 days) in the period of the last 5 years, the average days under water of 74 days of Aronson Family Taxable Portfolio is higher, thus worse.
- During the last 3 years, the average days under water is 104 days, which is greater, thus worse than the value of 45 days from the benchmark.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Aronson Family Taxable Portfolio are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.