The Margaritaville portfolio was proposed by Scott Burns, a popular Dallas Morning News financial columnist. It consists of one part total stock index, one part international stock index, and one part inflation-protected Treasury securities.

'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 (120.8%) in the period of the last 5 years, the total return of 65.6% of Margaritaville Portfolio is lower, thus worse.
- Looking at total return, or increase in value in of 35.8% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (66.3%).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (17.2%) in the period of the last 5 years, the annual performance (CAGR) of 10.6% of Margaritaville Portfolio is lower, thus worse.
- Compared with SPY (18.5%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 10.8% is lower, 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 volatility of 11.3% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (18.7%)
- Looking at 30 days standard deviation in of 13.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (22.4%).

'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.'

Which means for our asset as example:- Looking at the downside risk of 8.5% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.6%)
- During the last 3 years, the downside risk is 10%, which is lower, thus better than the value of 16.3% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The Sharpe Ratio over 5 years of Margaritaville Portfolio is 0.72, which is lower, thus worse compared to the benchmark SPY (0.78) in the same period.
- Looking at Sharpe Ratio in of 0.62 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.71).

'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.'

Using this definition on our asset we see for example:- Looking at the downside risk / excess return profile of 0.96 in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (1.08)
- Compared with SPY (0.98) in the period of the last 3 years, the excess return divided by the downside deviation of 0.83 is smaller, thus worse.

'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:- The Ulcer Ratio over 5 years of Margaritaville Portfolio is 4.29 , which is lower, thus better compared to the benchmark SPY (5.59 ) in the same period.
- Looking at Ulcer Ratio in of 4.82 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (6.83 ).

'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 -23.1 days in the last 5 years of Margaritaville Portfolio, we see it is relatively higher, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum drop from peak to valley is -23.1 days, which is greater, thus better than the value of -33.7 days from the benchmark.

'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) in days.'

Which means for our asset as example:- The maximum days below previous high over 5 years of Margaritaville Portfolio is 350 days, which is greater, thus worse compared to the benchmark SPY (139 days) in the same period.
- During the last 3 years, the maximum time in days below previous high water mark is 152 days, which is greater, thus worse than the value of 139 days from the benchmark.

'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:- Compared with the benchmark SPY (33 days) in the period of the last 5 years, the average days below previous high of 72 days of Margaritaville Portfolio is higher, thus worse.
- Looking at average days under water in of 36 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (35 days).

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 Margaritaville 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.