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:

'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 (94%) in the period of the last 5 years, the total return of 41.2% of Margaritaville Portfolio is lower, thus worse.
  • Compared with SPY (44.4%) in the period of the last 3 years, the total return, or increase in value of 16.6% is lower, thus worse.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (14.2%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 7.2% of Margaritaville Portfolio is smaller, thus worse.
  • During the last 3 years, the annual return (CAGR) is 5.3%, which is lower, thus worse than the value of 13.1% from the benchmark.

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:
  • The volatility over 5 years of Margaritaville Portfolio is 13%, which is lower, thus better compared to the benchmark SPY (21%) in the same period.
  • Looking at volatility in of 11.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.2%).

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 (15%) in the period of the last 5 years, the downside risk of 9.5% of Margaritaville Portfolio is lower, thus better.
  • Looking at downside volatility in of 7.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12%).

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.'

Applying this definition to our asset in some examples:
  • The risk / return profile (Sharpe) over 5 years of Margaritaville Portfolio is 0.36, which is smaller, thus worse compared to the benchmark SPY (0.56) in the same period.
  • During the last 3 years, the Sharpe Ratio is 0.25, which is lower, thus worse than the value of 0.62 from the benchmark.

Sortino:

'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.'

Applying this definition to our asset in some examples:
  • The ratio of annual return and downside deviation over 5 years of Margaritaville Portfolio is 0.49, which is smaller, thus worse compared to the benchmark SPY (0.78) in the same period.
  • Looking at ratio of annual return and downside deviation in of 0.36 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.88).

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:
  • Looking at the Ulcer Index of 8.47 in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (9.19 )
  • Compared with SPY (8.57 ) in the period of the last 3 years, the Ulcer Index of 7.29 is smaller, thus better.

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:
  • Looking at the maximum drop from peak to valley of -22.6 days in the last 5 years of Margaritaville Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (-32.8 days)
  • During the last 3 years, the maximum drop from peak to valley is -18.9 days, which is higher, thus better than the value of -22.1 days from the benchmark.

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 591 days in the last 5 years of Margaritaville Portfolio, we see it is relatively greater, thus worse in comparison to the benchmark SPY (488 days)
  • During the last 3 years, the maximum days under water is 437 days, which is larger, thus worse than the value of 325 days from the benchmark.

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:
  • The average time in days below previous high water mark over 5 years of Margaritaville Portfolio is 165 days, which is greater, thus worse compared to the benchmark SPY (121 days) in the same period.
  • Looking at average days under water in of 142 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (89 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Margaritaville Portfolio are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.