Description

Dr. William Bernstein is a physician and neurologist as well as a financial adviser to high net worth individuals. His smart money portfolio comprises the following fund allocation:

 

40% Vanguard Short Term Investment Grade VFSTX (SCJ, SHY)

15% Vanguard Total Stock Market VTSMX (NYSEARCA:VTI)

10% Vanguard Small Cap Value VISVX (NYSEARCA:VBR)

10% Vanguard Value Index VIVAX (NYSEARCA:VTV)

5% Vanguard Emerging Markets Stock VEIEX (NYSEARCA:VWO)

5% Vanguard European Stock VEURX (NYSEARCA:VEU)

5% Vanguard Pacific Stock VPACX (NYSEARCA:VPL)

5% Vanguard REIT Index VGSIX (RWX, VNQ)

5% Vanguard Small Cap Value NAESX or VTMSX (VB)

 

To summarize:

40% in U.S. equities

10% in international equities

5% in emerging market equities

5% in REITs

40% in fixed income

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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.'

Which means for our asset as example:
  • The total return, or increase in value over 5 years of Dr. Bernstein's Smart Money Portfolio is 31.5%, which is lower, thus worse compared to the benchmark SPY (74.4%) in the same period.
  • During the last 3 years, the total return is 11.1%, which is lower, thus worse than the value of 34.2% from the benchmark.

CAGR:

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (11.8%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 5.6% of Dr. Bernstein's Smart Money Portfolio is lower, thus worse.
  • During the last 3 years, the annual performance (CAGR) is 3.6%, which is smaller, thus worse than the value of 10.3% from the benchmark.

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:
  • Looking at the 30 days standard deviation of 10.7% in the last 5 years of Dr. Bernstein's Smart Money Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (18.9%)
  • Looking at historical 30 days volatility in of 12.5% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (22.6%).

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 deviation of 8.1% in the last 5 years of Dr. Bernstein's Smart Money Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.8%)
  • During the last 3 years, the downside risk is 9.6%, which is lower, thus better than the value of 16.7% from the benchmark.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (0.49) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.29 of Dr. Bernstein's Smart Money Portfolio is lower, thus worse.
  • Compared with SPY (0.35) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.09 is smaller, thus worse.

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.'

Using this definition on our asset we see for example:
  • The ratio of annual return and downside deviation over 5 years of Dr. Bernstein's Smart Money Portfolio is 0.39, which is smaller, thus worse compared to the benchmark SPY (0.67) in the same period.
  • During the last 3 years, the excess return divided by the downside deviation is 0.11, which is smaller, thus worse than the value of 0.47 from the benchmark.

Ulcer:

'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.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Ratio of 4.19 in the last 5 years of Dr. Bernstein's Smart Money Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (5.82 )
  • Looking at Downside risk index in of 5.14 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (7.13 ).

MaxDD:

'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 DrawDown over 5 years of Dr. Bernstein's Smart Money Portfolio is -24.3 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • Looking at maximum drop from peak to valley in of -24.3 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-33.7 days).

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) in days.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (139 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 180 days of Dr. Bernstein's Smart Money Portfolio is higher, thus worse.
  • During the last 3 years, the maximum days below previous high is 180 days, which is higher, thus worse than the value of 139 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.'

Which means for our asset as example:
  • Looking at the average days under water of 46 days in the last 5 years of Dr. Bernstein's Smart Money Portfolio, we see it is relatively greater, thus worse in comparison to the benchmark SPY (37 days)
  • Compared with SPY (45 days) in the period of the last 3 years, the average days below previous high of 59 days is higher, thus worse.

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 Dr. Bernstein's Smart Money 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.