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

'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.'

Using this definition on our asset we see for example:- The total return, or performance over 5 years of Dr. Bernstein's Smart Money Portfolio is 19.7%, which is smaller, thus worse compared to the benchmark SPY (60.7%) in the same period.
- During the last 3 years, the total return, or increase in value is 8.3%, which is lower, thus worse than the value of 29.5% from the benchmark.

'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 compounded annual growth rate (CAGR) of 3.7% of Dr. Bernstein's Smart Money Portfolio is lower, thus worse.
- Looking at compounded annual growth rate (CAGR) in of 2.7% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (9%).

'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.'

Applying this definition to our asset in some examples:- The 30 days standard deviation over 5 years of Dr. Bernstein's Smart Money Portfolio is 11.6%, which is lower, thus better compared to the benchmark SPY (20.8%) in the same period.
- Looking at volatility in of 13.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (24%).

'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.'

Using this definition on our asset we see for example:- Looking at the downside deviation of 8.8% 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 (15.3%)
- Compared with SPY (17.6%) in the period of the last 3 years, the downside risk of 10.4% is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.36) in the period of the last 5 years, the Sharpe Ratio of 0.1 of Dr. Bernstein's Smart Money Portfolio is smaller, thus worse.
- Looking at risk / return profile (Sharpe) in of 0.01 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.27).

'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.'

Using this definition on our asset we see for example:- Looking at the ratio of annual return and downside deviation of 0.13 in the last 5 years of Dr. Bernstein's Smart Money Portfolio, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (0.49)
- During the last 3 years, the ratio of annual return and downside deviation is 0.02, which is lower, thus worse than the value of 0.37 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (7.52 ) in the period of the last 5 years, the Ulcer Ratio of 5.27 of Dr. Bernstein's Smart Money Portfolio is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 6.35 , which is smaller, thus better than the value of 8.81 from the benchmark.

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Using this definition on our asset we see for example:- The maximum drop from peak to valley over 5 years of Dr. Bernstein's Smart Money Portfolio is -24.3 days, which is higher, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- Looking at maximum reduction from previous high in of -24.3 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (-33.7 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) in days.'

Using this definition on our asset we see for example:- The maximum days under water over 5 years of Dr. Bernstein's Smart Money Portfolio is 220 days, which is greater, thus worse compared to the benchmark SPY (182 days) in the same period.
- Looking at maximum days below previous high in of 220 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (182 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.'

Which means for our asset as example:- The average days under water over 5 years of Dr. Bernstein's Smart Money Portfolio is 61 days, which is larger, thus worse compared to the benchmark SPY (45 days) in the same period.
- Looking at average days under water in of 67 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (43 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 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.