This is a long overdue book keeping post updating statistics for the various portfolios that I track. All portfolio stats were gather using AllocateSmartly, P123, and the wonder that is Excel. Obviously there are a lot more portfolios. This is just a sampling. Go to AllocateSmartly for more on all kinds of TAA portfolios.
This post updates the portfolio statistics, through 2017, for all the various portfolios I track that I have data for going back to 1973. It is not comprehensive by any means but contains a good sample of various diversified global buy and hold portfolios, tactical asset allocation portfolios, and quant portfolios, as well as the popular benchmarks, in particular the 60/40 portfolio for US investors and a more global, better diversified version, GAA. Last year’s post is here and the portfolios are defined on the portfolios page. I’ll present the comparison of the portfolios in several ways with my favorite being risk adjusted returns. On to the data. The table below sorts the portfolios by returns over the last 20 years.
One year doesn’t change rankings very much and we can see the Quant and TAA portfolios are the top performing portfolios. The highest ranked buy and hold portfolio is Meb Faber’s IVY Buy and Hold 13 asset class portfolio. The table below sorts the portfolios by Sharpe ratio.
Again, we see the same thing here. TAA and Quant portfolios at the top of the list. The highest ranked buy and hold portfolio in this case is Risk Parity. Then we do on more ranking, for those thinking about the withdrawal phase of their investing lives. The table below sorts the portfolios by Safe Withdrawal Rates (SWRs).
Same story with SWRs, TAA and Quant portfolios are at the top of the list. The highest ranked buy and hold portfolio is once again the IVY buy and hold 13 asset class portfolio.
And that’s about it. Whether you’re comparing absolute or relative returns, risk-adjusted returns, or safe withdrawal rates, TAA and Quant portfolios offer far better solutions to meeting most financial objectives.
4 Comments
Phduke · August 3, 2018 at 11:56 am
Thanks for this Paul.
Congratulations on the ECON PILSE results! Would like for you to expand on those results as they are not part of Allocate Smartly Strategies. Why so much better than GEM for example?
Also, would be great to post the results in this format for the other ECON PULSE Models to compare.
Paul D.
paul.novell@gmail.com · August 5, 2018 at 12:47 am
Hey Paul, thanks. Basically what I’m doing that’s different to most TAA strategies is that I’m using that status of the economy to turn-off and on the classic TAA absolute momentum signals. That’s it in a nutshell. I go through the process at a high level in my description of the Econ Pulse Newsletter.
As for the other models, there is no data going back that far for most factor or country ETFs so can’t do that. For the other models I only go back to 1998. And that data is also posted in the descirption of the Econ Pulse Newsletter I linked to above.
Paul
Edward Kmiec · August 5, 2018 at 11:06 am
Paul,
First time on your blog and read through this article. I appreciate your taking the time to compare strategy performance.
After reading through another asset allocation strategy on Seeking Alpha, I commented that any one strategy never works all of the time, and you need a strategy to identify the best time to switch to another allocation strategy that is working.
Have you, or can you, identify the reasons why each of these strategies fail at times? A tall order I know, but this is something missing from every investment blog.
Thanks,
Ed
paul.novell@gmail.com · August 6, 2018 at 12:21 am
Hey Ed, thanks. That’s one of the reasons that the strategies work over the long term, because they don’t at times. If they outperformed all the time, then everyone would allocate to them, and they would stop working. There are all kinds of reasons for this, mainly human behavior. And TAA has become popular enough that we’re even starting to see some of this behavior, e.g performance chasing, among the strategies.
One algorithmic approach I’ve seen in helping to choose among TAA strategies is Allocate Smartly’s Meta Strategy. Otherwise, sticking with long term performance figures (returns, drawdowns, etc..) across market cycles and taking account other no performance factors such as number of trades and turnover is a pretty good approach. Last year I took a crack at an approach to choosing an investor’s first TAA strategy. See here.
Paul
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