There is a safer way to bet on growth. Forbes has a report of 10 Great Growth Stocks Value Investors Will Love. YCharts, which charts historic financial performance in dozens of ways, has devised a formula that picks growing stocks with far less risk of sudden losses than their traditional growth counterparts. Unlike “growth” stocks, which tend to underperform the S&P 500, YCharts’ Growth At a Reasonable Price (GARP) portfolio produced annualized returns of nearly double the market average over the past 30 years, when back-tested. YCharts’ GARP heeds the red flags that traditional growth investing ignores.
The report goes into more details about all of the stocks. Our goal here is to put them into a portfolio and measure them against our reference dividend portfolio.
We entered these stocks into our system and then compared them with a balanced portfolio of dividend producing ETFs.
|Asset||Fund in this portfolio|
|REAL ESTATE||ICF (iShares Cohen & Steers Realty Majors)|
|FIXED INCOME||[[TIP]] (iShares Barclays TIPS Bond)|
|Emerging Market||VWO (Vanguard Emerging Markets Stock ETF)|
|US EQUITY||[[DVY]] (iShares Dow Jones Select Dividend Index)|
|US EQUITY||[[VIG]] (Vanguard Dividend Appreciation ETF)|
|INTERNATIONAL EQUITY||[[IDV]] (iShares Dow Jones Intl Select Div Idx)|
|High Yield Bond||[[HYG]] (iShares iBoxx $ High Yield Corporate Bd)|
|INTERNATIONAL BONDS||[[EMB]] (iShares JPMorgan USD Emerg Markets Bond)|
- YCharts Growth at a Reasonable Price 2011 Selections -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
|Portfolio/Fund Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|YCharts Growth at a Reasonable Price 2011 Selections||23%||140%||11%||38%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||22%||208%||3%||14%||5%||25%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||16%||152%||9%||71%||10%||72%|
The more detailed analysis and graphs show the volatility of the stock portfolio which has performed well. It is roughly comparable with the reference portfolio but is in the lead. Note, however, that the Sharpe ratio is lower, indicating that you are taking on more volatility for the additional return.
This is an interesting approach and it may be worth looking into Y Charts in more depth.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.