Comparing portfolio performance (1973 to 2015)

I’ve finally managed to gather enough portfolio performance data to out together this year’s portfolio comparison edition. I was able to add 2014 and 2015 data. Last year’s post is here. You can use last year’s post and the Portfolios page for portfolio definitions. I’ll present the comparison of the portfolios in a few ways. I also added a few new fields this year. I added the last 3 yr, 5 yr, and 10 yr performance for each portfolio and performance in the last bull market and last bull/bear market cycle. Now, on to the data.

First, lets present the data in its most traditional way, by sorting the portfolios in terms of performance over the full time period, 1973 through 2015. There is a lot of data in these images so click on the image to make it easier to see.

A few notes on this presentation. Performance, CAGR, is highlighted in light orange. The most common, ‘traditional’ benchmarks, are highlighted in light blue. The portfolios in yellow are some of the popular buy and hold allocations where I had to create or simulate  the last 2 years of performance data based on their allocations. This method is pretty accurate since they’re passive portfolios but still the data is not exact and does not come from a standard source. So, what’s the main message here? Quant and TAA portfolios provide the highest performance over the entire time period. The Bernstein portfolio is the highest ranked buy and hold portfolio on the list at #12. Now on to risk adjusted performance.

Risk adjusted performance is a much better metric in choosing portfolios. Here I present the portfolios sorted by Sortino ratio, which doesn’t penalize portfolios for upside volatility, instead of the more traditional Sharpe ratio.

In risk adjusted terms, quant and TAA portfolios are also at the top of the list. The highest ranked buy and hold portfolio is the Risk Parity portfolio at #9. Risk adjusted metrics like the Sortino ratio are particularly important for investors in the withdrawal stage of their life. Higher risk adjusted returns is highly correlated with higher SWRs in retirement. Great, but many investors ask, ‘what have you done for me lately’? Maybe markets have changed, maybe what worked in the past doesn’t work anymore, etc…

Many investors use recent performance, especially since the start of the most recent bull market in 2009 to make portfolio comparisons. This is a mistake. You should at least look at the most recent bull/bear market cycle in addition to the full history. Below are the portfolios sorted by performance since the start of the last, in this case, bear/bull cycle which started in 2007.

Nothing surprising or new here. Quant and TAA portfolios have led the pack in the last full market cycle. The highest performing buy and hold portfolio the 70/30 US stock bind portfolio comes in at #9 with the vast outperformance of US markets over pretty much anything else in that time.

There you go. Tons of data to make all kinds of comparisons. Go crazy. These are my favorite 3 ways to look at portfolio performance.