Ted Aronson is an asset manager. His family taxable account portfolio has been featured and tracked by MarketWatch.com's lazy portfolios, maintained by Paul Farrel. The lazy portfolio has done very well prior to 2008-2009 crash.
The portfolio consists of the following index funds and their ETF substitutes:
- 20% in Vanguard Emerging Markets Stock Index (VEIEX) --- ETF: VWO
- 15% in Vanguard 500 Index (VFINX) --- ETF: VOO
- 15% in Vanguard Pacific Stock Index (VPACX) -- ETF: VPL
- 10% in Vanguard Extended Market Index (VEXMX) -- ETF: VXF
- 10% in Vanguard Inflation-Protected Securities (VIPSX) -- ETF: TIP
- 5% in Vanguard European Stock Index (VEURX) --- ETF: VGK
- 5% in Vanguard High-Yield Corporate (VWEHX) --- ETF: JNK
- 5% in Vanguard Long-Term U.S. Treasury (VUSTX) -- ETF: VGLT
- 5% in Vanguard Small Cap Growth (VISGX) --- ETF: VBK
- 5% in Vanguard Small Cap Value Index (VISVX) --- ETF: VBR
- 5% in Vanguard Total Stock Market Index (VTSMX) --- ETF: VTI
Asset Class | Ticker | Name |
---|---|---|
DIVERSIFIED EMERGING MKTS | VWO | Vanguard Emerging Markets Stock ETF |
LARGE BLEND | VOO | Vanguard S&P 500 ETF |
DIVERSIFIED PACIFIC/ASIA | VPL | Vanguard Pacific Stock ETF |
MID-CAP BLEND | VXF | Vanguard Extended Market Index ETF |
Inflation-Protected Bond | TIP | iShares Barclays TIPS Bond |
EUROPE STOCK | VGK | Vanguard European ETF |
High Yield Bond | JNK | SPDR Barclays Capital High Yield Bond |
LONG GOVERNMENT | VGLT | Vanguard Long-Term Govt Bd Idx ETF |
Small Growth | VBK | Vanguard Small Cap Growth ETF |
SMALL VALUE | VBR | Vanguard Small Cap Value ETF |
LARGE BLEND | VTI | Vanguard Total Stock Market ETF |
'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'
Applying this definition to our asset in some examples:'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:'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.'
Which means for our asset as example:'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'
Which means for our asset as example:'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:'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.'
Using this definition on our asset we see for example:'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:'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:'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'
Which means for our asset as example:'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: