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MyPlanIQ.com is the only web application that offers advanced asset allocation strategies customized to a wide range of retirement and taxable investment plans such as 401(k), IRA and brokerage accounts. The unique key advantages of MyPlanIQ.com are 1. Superior investment strategies with high... More
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  • Luminary Portfolios -- Browne Tops The List 0 comments
    Jan 7, 2011 5:50 PM | about stocks: ACWI, ACWX, ADRE, AGG, BIV, BLV, BND, BSV, BWX, CRED, CIU, CSJ, DBC, DBV, DIA, DVY, EDV, EEM, EFA, EFG, EFV, EMB, ETF, GLD, GOOG, GSG, GXC, HPQ, HYG, ICF, IEF, IEI, IFGL, IGOV, IGR, IJH, IJJ, IJK, IJR, IJS, IJT, IVE, IVV, IVW, IWB, IWC, IWD, IWF, IWM, IWN
    Earlier in the year, we presented a series of reports on lazy portfolios from investing luminaries. We went on to pit them together to come out with an overall winner.

    That was then, this is now. It's time to review their progress and look at how they have performed in 2010.

    Plan Name

    SAA 1 Year AR

    Original 1Year

    Asset Classes

    Lowell

    13%

    15%

    3

    Bernstein no brainer

    11%

    14%

    3

    Green's Gone Fishin

    11%

    13%

    6

    Swensen Six

    10%

    13%

    5

    Armstrong

    14%

    12%

    3.5

    Browne Permanent

    12%

    9%

    3


    We have come down to the top six based on their one year performance -- using the original strategy and also with a buy and hold where all of the risk assets are weighted evenly.

    On that basis the Lowell portfolio comes out on top followed by the Bernstein no brainer portfolio.

    With one year returns ranging from 9-15%, we can say that the returns are all good. However, this has been a strong year, especially for US equities and so this is not truly representative of what an investor could expect over the long term.

    If we broaden the time horizon and look at the Sharpe ratio for each of the portfolios, we have a slightly different story. The five year returns drop to a 3-8% range.

    We further note that the Browne portfolio that was at the bottom of the 1 year returns, pops to the top in the longer time horizon.

    Portfolio Name

    1Yr AR

    1Yr Sharpe

    3Yr AR

    3Yr Sharpe

    5Yr AR

    5Yr Sharpe

    Harry Browne

    9%

    131%

    6%

    60%

    8%

    74%

    Bernstein No Brainer

    14%

    83%

    3%

    10%

    5%

    17%

    Green Gone Fishin'

    13%

    79%

    2%

    9%

    5%

    21%

    Swensen Six

    13%

    91%

    2%

    5%

    5%

    21%

    Armstrong Original

    12%

    71%

    2%

    8%

    4%

    17%

    Lowell Original

    15%

    68%

    0%

    -3%

    3%

    7%



    We created SIB (Simpler is Better) portfolios one index fund for each asset class (ETF's are ideal for this) as a basic benchmark for each asset class portfolio. 

    Portfolio Name

    1Yr AR

    1Yr Sharpe

    3Yr AR

    3Yr Sharpe

    5Yr AR

    5Yr Sharpe

    Six Asset Popular ETFs TAA

    6%

    46%

    8%

    62%

    11%

    78%

    Six Asset Popular ETFs SAA

    9%

    72%

    1%

    5%

    5%

    21%

    When we look at the six asset benchmark over the five year span, we see that a buy and hold of six asset classes matches the best of the results of the luminaries and the tactical asset allocation strategy beats them.

    Takeaways
    • As in the reviews earlier in the year, the Browne permanent portfolio caught the perfect storm with US equities and gold both delivering over the past five years
    • It is critical to maintain a long term view and not get caught up in the exuberance of a strong year for US equities. The year's before that were ugly
    • A six asset class portfolio built up of the most popular ETF's matches the best results with buy and hold -- leading to the conclusion that diversification is always a good bet
    • Tactical asset allocation trumps them all in the long term because, while it doesn't respond as well in bull markets, it limits  your downside in bear markets


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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