MyPlanIQ's  Instablog

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