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 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:- The total return, or performance over 5 years of Margaritaville Portfolio is 50.7%, which is lower, thus worse compared to the benchmark SPY (110.3%) in the same period.
- Compared with SPY (39.7%) in the period of the last 3 years, the total return, or performance of 14.3% 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.'

Which means for our asset as example:- Compared with the benchmark SPY (16.1%) in the period of the last 5 years, the annual performance (CAGR) of 8.6% of Margaritaville Portfolio is lower, thus worse.
- Compared with SPY (11.8%) in the period of the last 3 years, the annual return (CAGR) of 4.6% is lower, thus worse.

'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 historical 30 days volatility over 5 years of Margaritaville Portfolio is 12.9%, which is smaller, thus better compared to the benchmark SPY (20.9%) in the same period.
- Looking at volatility in of 11.4% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (17.5%).

'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.'

Applying this definition to our asset in some examples:- Looking at the downside volatility of 9.4% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (14.9%)
- Looking at downside risk in of 7.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.2%).

'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.'

Which means for our asset as example:- Looking at the risk / return profile (Sharpe) of 0.47 in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.65)
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.18, which is smaller, thus worse than the value of 0.53 from the benchmark.

'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:- Looking at the ratio of annual return and downside deviation of 0.64 in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.91)
- Compared with SPY (0.76) in the period of the last 3 years, the excess return divided by the downside deviation of 0.26 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:- Looking at the Ulcer Index of 8.51 in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (9.32 )
- During the last 3 years, the Downside risk index is 10 , which is larger, thus worse than the value of 10 from the benchmark.

'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 drop from peak to valley of -23.1 days of Margaritaville Portfolio is higher, thus better.
- Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum DrawDown of -22.4 days is higher, thus better.

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:- Compared with the benchmark SPY (488 days) in the period of the last 5 years, the maximum days below previous high of 591 days of Margaritaville Portfolio is larger, thus worse.
- During the last 3 years, the maximum days under water is 591 days, which is larger, thus worse than the value of 488 days from the benchmark.

'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 (124 days) in the period of the last 5 years, the average days under water of 168 days of Margaritaville Portfolio is greater, thus worse.
- During the last 3 years, the average days under water is 248 days, which is greater, thus worse than the value of 179 days from the benchmark.

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 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.