Description

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.

Statistics (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:
  • Looking at the total return, or increase in value of 35.2% in the last 5 years of Margaritaville Portfolio, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (74.2%)
  • During the last 3 years, the total return is 27.4%, which is smaller, thus worse than the value of 50.1% from the benchmark.

CAGR:

'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:
  • Looking at the annual return (CAGR) of 6.2% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (11.8%)
  • Compared with SPY (14.5%) in the period of the last 3 years, the annual performance (CAGR) of 8.4% 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:
  • Compared with the benchmark SPY (13.3%) in the period of the last 5 years, the volatility of 8.4% of Margaritaville Portfolio is lower, thus better.
  • During the last 3 years, the 30 days standard deviation is 7.6%, which is smaller, thus better than the value of 13% from the benchmark.

DownVol:

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

Which means for our asset as example:
  • Compared with the benchmark SPY (9.6%) in the period of the last 5 years, the downside deviation of 6.1% of Margaritaville Portfolio is lower, thus better.
  • During the last 3 years, the downside risk is 5.5%, which is lower, thus better than the value of 9.4% from the benchmark.

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:
  • The ratio of return and volatility (Sharpe) over 5 years of Margaritaville Portfolio is 0.44, which is lower, thus worse compared to the benchmark SPY (0.69) in the same period.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 0.78, which is lower, thus worse than the value of 0.93 from the benchmark.

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (0.96) in the period of the last 5 years, the excess return divided by the downside deviation of 0.61 of Margaritaville Portfolio is lower, thus worse.
  • Compared with SPY (1.27) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.08 is lower, thus worse.

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (3.97 ) in the period of the last 5 years, the Ulcer Ratio of 4.33 of Margaritaville Portfolio is greater, thus worse.
  • During the last 3 years, the Ulcer Ratio is 3.64 , which is lower, thus better than the value of 4.1 from the benchmark.

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:
  • The maximum reduction from previous high over 5 years of Margaritaville Portfolio is -14 days, which is greater, thus better compared to the benchmark SPY (-19.3 days) in the same period.
  • Looking at maximum DrawDown in of -14 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 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:
  • Looking at the maximum days below previous high of 350 days in the last 5 years of Margaritaville Portfolio, we see it is relatively greater, 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 under water of 350 days is larger, thus worse.

AveDuration:

'The Average 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. 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:
  • The average days under water over 5 years of Margaritaville Portfolio is 114 days, which is higher, thus worse compared to the benchmark SPY (42 days) in the same period.
  • Compared with SPY (37 days) in the period of the last 3 years, the average days below previous high of 101 days is greater, thus worse.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • 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.