Description of Aronson Family Taxable Portfolio

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

Statistics of Aronson Family Taxable Portfolio (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:
  • The total return, or performance over 5 years of Aronson Family Taxable Portfolio is 35.8%, which is smaller, thus worse compared to the benchmark SPY (68.2%) in the same period.
  • Looking at total return, or increase in value in of 29.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (47.7%).

CAGR:

'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.'

Which means for our asset as example:
  • The compounded annual growth rate (CAGR) over 5 years of Aronson Family Taxable Portfolio is 6.3%, which is lower, thus worse compared to the benchmark SPY (11%) in the same period.
  • Compared with SPY (13.9%) in the period of the last 3 years, the annual return (CAGR) of 9% is lower, thus worse.

Volatility:

'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:
  • The volatility over 5 years of Aronson Family Taxable Portfolio is 8.7%, which is lower, thus better compared to the benchmark SPY (13.2%) in the same period.
  • Looking at historical 30 days volatility in of 8.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.4%).

DownVol:

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

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (14.6%) in the period of the last 5 years, the downside volatility of 9.6% of Aronson Family Taxable Portfolio is smaller, thus better.
  • Looking at downside risk in of 9.4% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (14%).

Sharpe:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (0.64) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.44 of Aronson Family Taxable Portfolio is smaller, thus worse.
  • Looking at ratio of return and volatility (Sharpe) in of 0.79 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.92).

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Applying this definition to our asset in some examples:
  • The ratio of annual return and downside deviation over 5 years of Aronson Family Taxable Portfolio is 0.4, which is lower, thus worse compared to the benchmark SPY (0.58) in the same period.
  • Compared with SPY (0.81) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.69 is smaller, thus worse.

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:
  • Compared with the benchmark SPY (3.95 ) in the period of the last 5 years, the Ulcer Ratio of 4.74 of Aronson Family Taxable Portfolio is greater, thus better.
  • Compared with SPY (4 ) in the period of the last 3 years, the Downside risk index of 3.66 is lower, thus worse.

MaxDD:

'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:
  • Looking at the maximum drop from peak to valley of -15.4 days in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (-19.3 days)
  • Looking at maximum drop from peak to valley in of -14.8 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-19.3 days).

MaxDuration:

'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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days below previous high of 327 days of Aronson Family Taxable Portfolio is greater, thus worse.
  • During the last 3 years, the maximum time in days below previous high water mark is 288 days, which is greater, thus worse than the value of 131 days from the benchmark.

AveDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. 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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 95 days in the last 5 years of Aronson Family Taxable Portfolio, we see it is relatively higher, thus worse in comparison to the benchmark SPY (39 days)
  • Compared with SPY (33 days) in the period of the last 3 years, the average time in days below previous high water mark of 73 days is greater, thus worse.

Performance of Aronson Family Taxable Portfolio (YTD)

Historical returns have been extended using synthetic data.

Allocations of Aronson Family Taxable Portfolio
()

Allocations

Returns of Aronson Family Taxable Portfolio (%)

  • "Year" returns in the table above are not equal to 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.