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 (133.2%) in the period of the last 5 years, the total return, or performance of 70.1% of Margaritaville Portfolio is lower, thus worse.
  • During the last 3 years, the total return, or increase in value is 50.3%, which is smaller, thus worse than the value of 80.4% 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:
  • The annual performance (CAGR) over 5 years of Margaritaville Portfolio is 11.2%, which is lower, thus worse compared to the benchmark SPY (18.5%) in the same period.
  • Compared with SPY (21.8%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 14.6% is smaller, thus worse.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:
  • The 30 days standard deviation over 5 years of Margaritaville Portfolio is 11.2%, which is smaller, thus better compared to the benchmark SPY (18.7%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 13.3%, which is lower, thus better than the value of 22.4% from the benchmark.

DownVol:

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

Applying this definition to our asset in some examples:
  • Looking at the downside volatility of 8.4% in the last 5 years of Margaritaville Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.6%)
  • Compared with SPY (16.2%) in the period of the last 3 years, the downside deviation of 10% is lower, thus better.

Sharpe:

'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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.85) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.78 of Margaritaville Portfolio is lower, thus worse.
  • Compared with SPY (0.86) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.91 is larger, thus better.

Sortino:

'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 1.04, which is lower, thus worse compared to the benchmark SPY (1.18) in the same period.
  • Looking at downside risk / excess return profile in of 1.21 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (1.19).

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (5.59 ) in the period of the last 5 years, the Ulcer Ratio of 4.27 of Margaritaville Portfolio is lower, thus better.
  • Looking at Ulcer Index in of 4.33 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (6.36 ).

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.'

Applying this definition to our asset in some examples:
  • The maximum DrawDown over 5 years of Margaritaville Portfolio is -23.1 days, which is higher, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum reduction from previous high of -23.1 days is higher, thus better.

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'

Using this definition on our asset we see for example:
  • Looking at the maximum time in days below previous high water mark 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 (139 days)
  • Compared with SPY (119 days) in the period of the last 3 years, the maximum days under water of 114 days is smaller, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the average days below previous high of 71 days in the last 5 years of Margaritaville Portfolio, we see it is relatively greater, thus worse in comparison to the benchmark SPY (32 days)
  • Compared with SPY (25 days) in the period of the last 3 years, the average days below previous high of 22 days is smaller, thus better.

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.