Paul Merriman's Fundadvice Ultimate Buy & Hold. Another Lazy Portfolio that is tracked by MarketWatch.

Merriman describes it: The "ultimate" portfolio starts with the S&P 500 index (SPX) then adds small and equal portions of nine other very carefully selected U.S. and international asset classes, each one being an excellent long-term vehicle for diversifying. When it's properly done, the result is a low-cost portfolio with massive diversification that will take advantage of market opportunities wherever they are, and at about the same risk as that of the S&P 500.

We track the portfolio using Mutual Funds

VFINX=6%, VFISX=12%, VFITX=20%, VEIEX=6%, VGSIX=6%, NAESX=6%, VISVX=6%, VIVAX=6%, VIPSX=8%, VTMGX=12%, VTRIX=12%

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- Looking at the total return, or performance of 49.9% in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (133.2%)
- Compared with SPY (80.4%) in the period of the last 3 years, the total return of 36.8% is lower, thus worse.

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- The annual performance (CAGR) over 5 years of Fundadvice Ultimate Buy & Hold is 8.4%, which is lower, thus worse compared to the benchmark SPY (18.5%) in the same period.
- During the last 3 years, the annual return (CAGR) is 11%, which is lower, thus worse than the value of 21.8% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Using this definition on our asset we see for example:- The historical 30 days volatility over 5 years of Fundadvice Ultimate Buy & Hold is 9.6%, which is smaller, thus better compared to the benchmark SPY (18.7%) in the same period.
- During the last 3 years, the historical 30 days volatility is 11.5%, which is lower, thus better than the value of 22.4% from the benchmark.

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Applying this definition to our asset in some examples:- Looking at the downside deviation of 7.2% in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.6%)
- During the last 3 years, the downside volatility is 8.7%, which is smaller, thus better than the value of 16.2% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.85) in the period of the last 5 years, the Sharpe Ratio of 0.62 of Fundadvice Ultimate Buy & Hold is smaller, thus worse.
- Compared with SPY (0.86) in the period of the last 3 years, the Sharpe Ratio of 0.74 is lower, thus worse.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:- The excess return divided by the downside deviation over 5 years of Fundadvice Ultimate Buy & Hold is 0.82, which is lower, thus worse compared to the benchmark SPY (1.18) in the same period.
- Compared with SPY (1.19) in the period of the last 3 years, the excess return divided by the downside deviation of 0.98 is lower, thus worse.

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:- The Ulcer Index over 5 years of Fundadvice Ultimate Buy & Hold is 3.93 , which is smaller, thus better compared to the benchmark SPY (5.59 ) in the same period.
- Looking at Downside risk index in of 4.19 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (6.36 ).

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum drop from peak to valley of -21 days of Fundadvice Ultimate Buy & Hold is higher, thus better.
- During the last 3 years, the maximum drop from peak to valley is -21 days, which is higher, thus better than the value of -33.7 days from the benchmark.

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:- Looking at the maximum time in days below previous high water mark of 317 days in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively larger, thus worse in comparison to the benchmark SPY (139 days)
- During the last 3 years, the maximum days under water is 187 days, which is larger, thus worse than the value of 119 days from the benchmark.

'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:- Looking at the average days under water of 70 days in the last 5 years of Fundadvice Ultimate Buy & Hold, we see it is relatively higher, thus worse in comparison to the benchmark SPY (32 days)
- During the last 3 years, the average days under water is 40 days, which is larger, thus worse than the value of 25 days from the benchmark.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Fundadvice Ultimate Buy & Hold are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.