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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (66%) in the period of the last 5 years, the total return of 22% of Fundadvice Ultimate Buy & Hold is lower, thus worse.
  • Compared with SPY (45.6%) in the period of the last 3 years, the total return, or increase in value of 19% is lower, thus worse.

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:
  • Looking at the annual return (CAGR) of 4.1% in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (10.7%)
  • Compared with SPY (13.3%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 6% is smaller, thus worse.

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.'

Using this definition on our asset we see for example:
  • Looking at the historical 30 days volatility of 7.2% in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively smaller, thus better in comparison to the benchmark SPY (13.4%)
  • Compared with SPY (12.3%) in the period of the last 3 years, the volatility of 6.2% is lower, thus better.

DownVol:

'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.'

Using this definition on our asset we see for example:
  • Looking at the downside risk of 7.8% in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively smaller, thus better in comparison to the benchmark SPY (14.6%)
  • Compared with SPY (13.8%) in the period of the last 3 years, the downside risk of 6.9% is lower, thus better.

Sharpe:

'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.'

Which means for our asset as example:
  • Looking at the Sharpe Ratio of 0.22 in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.61)
  • Compared with SPY (0.88) in the period of the last 3 years, the Sharpe Ratio of 0.56 is smaller, 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:
  • The downside risk / excess return profile over 5 years of Fundadvice Ultimate Buy & Hold is 0.2, which is lower, thus worse compared to the benchmark SPY (0.56) in the same period.
  • Compared with SPY (0.78) in the period of the last 3 years, the downside risk / excess return profile of 0.5 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.'

Applying this definition to our asset in some examples:
  • The Ulcer Index over 5 years of Fundadvice Ultimate Buy & Hold is 3.79 , which is lower, thus better compared to the benchmark SPY (3.99 ) in the same period.
  • During the last 3 years, the Ulcer Index is 3.05 , which is lower, thus better than the value of 4.04 from the benchmark.

MaxDD:

'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.'

Using this definition on our asset we see for example:
  • The maximum drop from peak to valley over 5 years of Fundadvice Ultimate Buy & Hold is -12.3 days, which is larger, thus better compared to the benchmark SPY (-19.3 days) in the same period.
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum DrawDown of -11.6 days is greater, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the maximum time in days below previous high water mark of 329 days in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively higher, thus worse in comparison to the benchmark SPY (187 days)
  • Compared with SPY (139 days) in the period of the last 3 years, the maximum days below previous high of 317 days is greater, thus worse.

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.'

Which means for our asset as example:
  • Looking at the average time in days below previous high water mark of 101 days in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively larger, thus worse in comparison to the benchmark SPY (41 days)
  • Looking at average time in days below previous high water mark in of 84 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.