Lazy Portfolios -- The Playoffs II
10/19/2010 0 comments
This is the second article as we attempt to whittle down the lazy portfolios to four finalists for great analysis of what makes for a great portfolio. We are in the bottom half of the alphabetical list and the eight are listed in reducing order asset classes and funds. We have stated that the winners should be those with the most asset classes and highest number of funds.
| Portfolio | Classes | Funds | ETF Equivalent |
| Seven-12 | 7 | 12 | Y |
| SIX SIB SAA | 6 | 6 | y |
| Gone Fishin' | 5 | 10 | y |
| Swensen 6 | 4 | 6 | Y |
| Wasik`s Nano | 4 | 5 | Y |
| Harry Browne | 3 | 4 | Y |
| Schultheis | 3 | 3 | Y |
| Lowell | 2 | 8 | Y |
We are using this series of comparisons to validate whether this proves to be true.
- Craig L. Israelsen, Ph.D., is an Associate Professor at Brigham Young University. The Seven Equally Weighted, twelve fund portfolio is aimed to protect against losses.
- The MyPlanIQ six asset SIB has index funds for each of the asset classes represented and rebalances monthly – this is primarily a benchmark portfolio
- Alexander Green proposed this The Gone Fishin' Portfolio which was outlined in his book 'The Gone Fishin' Portfolio'
- David Swensen, the Yale Endowment Manager, proposed this one size fit in all model portfolio for individual investors.
- John Wasik has been a professional journalist and author for 30 years specializing in personal finance. John proposed a portfolio which employs a handful of index or ETFs
- Harry Browne is the author of Fail-Safe Investing
- Bill Schulthe is is a former Smith Barney broker and author of "The Coffeehouse Investor."
- Jim Lowell edits MarketWatch's ETF Trader, an investment letter employing a momentum-based exchange-traded-fund strategy for long-term investors.
The returns are now presented in order of highest to lowest of the five year returns. How do the returns compare to what we would have expected?
| Portfolio/AR(%) | 1 Yr | 3 Yr | 5 Yr | Inception |
| Harry Browne | 12.49 | 7.40 | 8.99 | 7.31 |
| Six SIB SAA | 12.54 | 1.61 | 7.44 | 8.26 |
| Seven-12 | 15.55 | 0.80 | 6.41 | 6.16 |
| Swensen Six | 15.10 | (0.24) | 6.21 | 7.10 |
| Gone Fishin' | 12.98 | (0.34) | 5.64 | 6.72 |
| Wasik`s Nano | 15.34 | (1.93) | 4.74 | 4.66 |
| Schultheis | 9.23 | (2.28) | 4.68 | 4.59 |
| Lowell | 12.45 | (6.26) | 3.55 | 6.74 |
- The portfolios roughly follow the asset class/fund class as would be expected
- The Harry Browne portfolio stands out as the clear exception to the rule – it has a signnificant lead over the other portfolios
- The six asset SIB performed well – that was expected. Six asset classes with index funds should perform well
When we look at the drawdown for each of the portfolios, it will reveal which is the most painful to own.
|
Portfolio/DD
|
1 Yr
|
3 Yr
|
5 Yr
|
Inception
|
|
Harry Browne
|
5%
|
15%
|
15%
|
15%
|
|
Swensen Six
|
8%
|
39%
|
39%
|
39%
|
|
Six SIB SAA
|
8%
|
39%
|
39%
|
39%
|
|
Schultheis
|
9%
|
39%
|
39%
|
39%
|
|
Seven-12
|
8%
|
40%
|
40%
|
40%
|
|
Gone Fishin'
|
9%
|
42%
|
42%
|
42%
|
|
Wasik`s Nano
|
9%
|
44%
|
44%
|
44%
|
|
Lowell
|
16%
|
57%
|
57%
|
57%
|
Again the Harry Browne portfolio is the clear winner.
We select the top two – which are the Harry Browne and Six asset SIB to move to the final round where they will be put against the best two funds from the top half of the alphabet.
Takeaways
- The portfolios followed the expected path against asset classes and funds
- The Harry Browne portfolio was the clear winner and was the exception – we will find out in the final article whether it proves the rule
- With the exception of the Harry Browne portfolio, the drawdown ratios are uncomfortably high
- ETF’s can be used to implement any of these strategies
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