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:- Looking at the total return, or increase in value of 26.1% in the last 5 years of Margaritaville Portfolio, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (60.6%)
- Compared with SPY (38%) in the period of the last 3 years, the total return, or performance of 13.4% is lower, thus worse.

'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 (10%) in the period of the last 5 years, the annual performance (CAGR) of 4.8% of Margaritaville Portfolio is smaller, thus worse.
- During the last 3 years, the compounded annual growth rate (CAGR) is 4.3%, which is lower, thus worse than the value of 11.3% from the benchmark.

'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.'

Which means for our asset as example:- The 30 days standard deviation over 5 years of Margaritaville Portfolio is 13.1%, which is lower, thus better compared to the benchmark SPY (21.5%) in the same period.
- Looking at 30 days standard deviation in of 11.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.9%).

'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:- The downside deviation over 5 years of Margaritaville Portfolio is 9.6%, which is lower, thus better compared to the benchmark SPY (15.5%) in the same period.
- During the last 3 years, the downside deviation is 8%, which is lower, thus better than the value of 12.5% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The ratio of return and volatility (Sharpe) over 5 years of Margaritaville Portfolio is 0.17, which is lower, thus worse compared to the benchmark SPY (0.35) in the same period.
- Compared with SPY (0.49) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.15 is lower, thus worse.

'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.'

Applying this definition to our asset in some examples:- The downside risk / excess return profile over 5 years of Margaritaville Portfolio is 0.24, which is smaller, thus worse compared to the benchmark SPY (0.48) in the same period.
- Compared with SPY (0.71) in the period of the last 3 years, the downside risk / excess return profile of 0.22 is lower, thus worse.

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:- The Downside risk index over 5 years of Margaritaville Portfolio is 8.33 , which is lower, thus better compared to the benchmark SPY (9.55 ) in the same period.
- Looking at Ulcer Index in of 9.65 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

'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:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -23.1 days of Margaritaville Portfolio is larger, thus better.
- Looking at maximum drop from peak to valley in of -22.4 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-24.5 days).

'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'

Using this definition on our asset we see for example:- The maximum days below previous high over 5 years of Margaritaville Portfolio is 468 days, which is larger, thus worse compared to the benchmark SPY (431 days) in the same period.
- Looking at maximum days below previous high in of 468 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (431 days).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (105 days) in the period of the last 5 years, the average days under water of 117 days of Margaritaville Portfolio is larger, thus worse.
- Looking at average days under water in of 168 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (144 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.