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:

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (66.9%) in the period of the last 5 years, the total return, or performance of % of Fundadvice Ultimate Buy & Hold is lower, thus worse.
  • Looking at total return, or increase in value in of % in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (50.6%).

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Which means for our asset as example:
  • The annual performance (CAGR) over 5 years of Fundadvice Ultimate Buy & Hold is %, which is smaller, thus worse compared to the benchmark SPY (10.8%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of % in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (14.7%).

Volatility:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the volatility of % in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.5%)
  • Compared with SPY (12.8%) in the period of the last 3 years, the volatility of % is lower, thus better.

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:
  • Compared with the benchmark SPY (14.8%) in the period of the last 5 years, the downside deviation of % of Fundadvice Ultimate Buy & Hold is lower, thus better.
  • During the last 3 years, the downside risk is %, which is smaller, thus better than the value of 14.7% from the benchmark.

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.61) in the period of the last 5 years, the Sharpe Ratio of of Fundadvice Ultimate Buy & Hold is lower, thus worse.
  • Looking at risk / return profile (Sharpe) in of in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.95).

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.'

Using this definition on our asset we see for example:
  • Looking at the excess return divided by the downside deviation of in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (0.56)
  • Looking at downside risk / excess return profile in of in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.83).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (3.99 ) in the period of the last 5 years, the Ulcer Index of of Fundadvice Ultimate Buy & Hold is lower, thus better.
  • Looking at Ulcer Index in of in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (4.1 ).

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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum reduction from previous high of days in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively greater, thus better in comparison to the benchmark SPY (-19.3 days)
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of days is higher, thus better.

MaxDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of Fundadvice Ultimate Buy & Hold is days, which is smaller, thus better compared to the benchmark SPY (187 days) in the same period.
  • Compared with SPY (139 days) in the period of the last 3 years, the maximum days below previous high of days is lower, thus better.

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:
  • The average time in days below previous high water mark over 5 years of Fundadvice Ultimate Buy & Hold is days, which is lower, thus better compared to the benchmark SPY (42 days) in the same period.
  • Compared with SPY (36 days) in the period of the last 3 years, the average time in days below previous high water mark of days is lower, thus better.

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 (%)

  • Note that yearly returns do not equal 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.