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.'

Applying this definition to our asset in some examples:
  • The total return, or increase in value over 5 years of Dr. Bernstein's Smart Money Portfolio is 49.7%, which is lower, thus worse compared to the benchmark SPY (110.4%) in the same period.
  • During the last 3 years, the total return, or performance is 34.7%, which is lower, thus worse than the value of 72.5% 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.'

Which means for our asset as example:
  • The annual performance (CAGR) over 5 years of Dr. Bernstein's Smart Money Portfolio is 8.4%, which is smaller, thus worse compared to the benchmark SPY (16.1%) in the same period.
  • During the last 3 years, the annual performance (CAGR) is 10.5%, which is lower, thus worse than the value of 20.1% from the benchmark.

Volatility:

'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 volatility over 5 years of Dr. Bernstein's Smart Money Portfolio is 9.8%, which is lower, thus better compared to the benchmark SPY (17.5%) in the same period.
  • During the last 3 years, the historical 30 days volatility is 9.7%, which is lower, thus better than the value of 17.5% from the benchmark.

DownVol:

'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.'

Which means for our asset as example:
  • The downside risk over 5 years of Dr. Bernstein's Smart Money Portfolio is 6.8%, which is lower, thus better compared to the benchmark SPY (12.1%) in the same period.
  • Compared with SPY (11.5%) in the period of the last 3 years, the downside deviation of 6.5% 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.'

Which means for our asset as example:
  • The risk / return profile (Sharpe) over 5 years of Dr. Bernstein's Smart Money Portfolio is 0.61, which is smaller, thus worse compared to the benchmark SPY (0.78) in the same period.
  • Compared with SPY (1.01) in the period of the last 3 years, the Sharpe Ratio of 0.83 is lower, 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 0.88, which is lower, thus worse compared to the benchmark SPY (1.13) in the same period.
  • Compared with SPY (1.53) in the period of the last 3 years, the excess return divided by the downside deviation of 1.24 is smaller, thus worse.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (8.48 ) in the period of the last 5 years, the Ulcer Index of 5.93 of Dr. Bernstein's Smart Money Portfolio is smaller, thus better.
  • Looking at Ulcer Index in of 3.26 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (5.31 ).

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:
  • Looking at the maximum DrawDown of -17.2 days in the last 5 years of Dr. Bernstein's Smart Money Portfolio, we see it is relatively larger, thus better in comparison to the benchmark SPY (-24.5 days)
  • During the last 3 years, the maximum drop from peak to valley is -10.7 days, which is greater, thus better than the value of -18.8 days from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The maximum time in days below previous high water mark over 5 years of Dr. Bernstein's Smart Money Portfolio is 566 days, which is larger, thus worse compared to the benchmark SPY (488 days) in the same period.
  • Compared with SPY (199 days) in the period of the last 3 years, the maximum days below previous high of 124 days is lower, thus better.

AveDuration:

'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 (120 days) in the period of the last 5 years, the average days below previous high of 155 days of Dr. Bernstein's Smart Money Portfolio is larger, thus worse.
  • Compared with SPY (47 days) in the period of the last 3 years, the average days below previous high of 40 days is lower, thus better.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

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 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.