Description of Fundadvice Ultimate Buy & Hold

Paul Merriman's Fundadvice Ultimate Buy & Hold. Another Lazy Portfolio that is tracked by MarketWatch.

Merriman describes it: The "ultimate" portfolio starts with the S&P 500 index SPX then adds small and equal portions of nine other very carefully selected U.S. and international asset classes, each one being an excellent long-term vehicle for diversifying. When it's properly done, the result is a low-cost portfolio with massive diversification that will take advantage of market opportunities wherever they are, and at about the same risk as that of the S&P 500."

We track the portfolio using Mutual Funds

VFINX=6%, VFISX=12%, VFITX=20%, VEIEX=6%, VGSIX=6%, NAESX=6%, VISVX=6%, VIVAX=6%, VIPSX=8%, VTMGX=12%, VTRIX=12%

Statistics of Fundadvice Ultimate Buy & Hold (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:
  • Compared with the benchmark SPY (66.2%) in the period of the last 5 years, the total return, or performance of 21% of Fundadvice Ultimate Buy & Hold is lower, thus worse.
  • During the last 3 years, the total return, or performance is 20.8%, which is lower, thus worse than the value of 47.5% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The compounded annual growth rate (CAGR) over 5 years of Fundadvice Ultimate Buy & Hold is 3.9%, which is lower, thus worse compared to the benchmark SPY (10.7%) in the same period.
  • Compared with SPY (13.9%) in the period of the last 3 years, the annual performance (CAGR) of 6.5% 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.'

Applying this definition to our asset in some examples:
  • The historical 30 days volatility over 5 years of Fundadvice Ultimate Buy & Hold is 7.2%, which is lower, thus better compared to the benchmark SPY (13.3%) in the same period.
  • Looking at 30 days standard deviation in of 6.6% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (12.5%).

DownVol:

'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 7.8% in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively lower, thus better in comparison to the benchmark SPY (14.6%)
  • Compared with SPY (14.2%) in the period of the last 3 years, the downside volatility of 7.5% is smaller, thus better.

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:
  • The ratio of return and volatility (Sharpe) over 5 years of Fundadvice Ultimate Buy & Hold is 0.19, which is lower, thus worse compared to the benchmark SPY (0.62) in the same period.
  • Compared with SPY (0.91) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.61 is lower, thus worse.

Sortino:

'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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (0.56) in the period of the last 5 years, the downside risk / excess return profile of 0.18 of Fundadvice Ultimate Buy & Hold is lower, thus worse.
  • During the last 3 years, the downside risk / excess return profile is 0.53, which is lower, thus worse than the value of 0.8 from the benchmark.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (3.96 ) in the period of the last 5 years, the Ulcer Index of 3.78 of Fundadvice Ultimate Buy & Hold is smaller, thus worse.
  • Looking at Ulcer Index in of 3.05 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (4.01 ).

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:
  • Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -12.3 days of Fundadvice Ultimate Buy & Hold is greater, thus better.
  • Looking at maximum DrawDown in of -11.7 days in the period of the last 3 years, we see it is relatively larger, 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.'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of Fundadvice Ultimate Buy & Hold is 329 days, which is higher, thus worse compared to the benchmark SPY (187 days) in the same period.
  • Looking at maximum days under water in of 317 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (139 days).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (41 days) in the period of the last 5 years, the average days below previous high of 101 days of Fundadvice Ultimate Buy & Hold is larger, thus worse.
  • Looking at average time in days below previous high water mark in of 85 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (36 days).

Performance of Fundadvice Ultimate Buy & Hold (YTD)

Historical returns have been extended using synthetic data.

Allocations of Fundadvice Ultimate Buy & Hold
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Allocations

Returns of Fundadvice Ultimate Buy & Hold (%)

  • "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
  • Performance results of Fundadvice Ultimate Buy & Hold 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.