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.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:- The total return, or performance over 5 years of Margaritaville Portfolio is 25.9%, which is lower, thus worse compared to the benchmark SPY (58.9%) in the same period.
- Looking at total return in of 16.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (33.9%).

'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 (9.7%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 4.7% of Margaritaville Portfolio is smaller, thus worse.
- During the last 3 years, the annual performance (CAGR) is 5.3%, which is smaller, thus worse than the value of 10.2% 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.'

Applying this definition to our asset in some examples:- Looking at the historical 30 days volatility of 13.1% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (21.6%)
- During the last 3 years, the historical 30 days volatility is 15.3%, which is lower, thus better than the value of 25% from the benchmark.

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

Using this definition on our asset we see for example:- Looking at the downside volatility of 9.7% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (15.7%)
- Looking at downside volatility in of 11.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (18.1%).

'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 risk / return profile (Sharpe) over 5 years of Margaritaville Portfolio is 0.17, which is lower, thus worse compared to the benchmark SPY (0.33) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.19, which is lower, thus worse than the value of 0.31 from the benchmark.

'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 (0.46) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.23 of Margaritaville Portfolio is lower, thus worse.
- Looking at downside risk / excess return profile in of 0.25 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.43).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (8.91 ) in the period of the last 5 years, the Ulcer Index of 7.45 of Margaritaville Portfolio is smaller, thus better.
- During the last 3 years, the Downside risk index is 9.16 , which is lower, thus better than the value of 11 from the benchmark.

'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:- The maximum reduction from previous high over 5 years of Margaritaville Portfolio is -23.1 days, which is larger, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- During the last 3 years, the maximum reduction from previous high is -23.1 days, which is higher, 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:- Looking at the maximum days below previous high of 308 days in the last 5 years of Margaritaville Portfolio, we see it is relatively larger, thus worse in comparison to the benchmark SPY (271 days)
- Looking at maximum time in days below previous high water mark in of 308 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (271 days).

'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:- Compared with the benchmark SPY (60 days) in the period of the last 5 years, the average time in days below previous high water mark of 95 days of Margaritaville Portfolio is higher, thus worse.
- Looking at average time in days below previous high water mark in of 86 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (72 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.