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and those return #s look low, but they are excess return #s so don't include the 'risk free rate' that you get in addition to it (probably like 3% or so).
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So this give you around 8%-9% return?
Can you explain how this is better than the suggested portfolio linked below which a lot of people have been posting
http://www.fundadvice.com/portfolio.html
Annualized return: 13.1%
Std Dev: 10.9
It is based on portfolio #6 found here:
http://www.fundadvice.com/articles/b...-strategy.html
This portfolio is also unleveraged, has no load fees, and minimum expense ratios.
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i haven't dug into it yet but there is one MAJOR thing that i did that i'd bet nobody calculating a portfolio did: i assumed that the sharpe ratio of all asset classes are between .2 and .3
to get excess returns, i then multiplied the historical (with logical thought behind it) standard deviation of the excess return * the sharpe ratio for that investment/asset class etc.
i'd be willing to bet what you posted uses historical return figures as if they were fact.
i'd bet if i redid it to standardize it, it would come out with something like a .35 at BEST sharpe ratio.
Barron
EDIT: yup, i justvery quickly glanced over the 2nd link and they a) show total return (i.e. the return that includes the risk free rate) and b) don't come anywhere remotely close to thinking about standard deviation of a portfolio correctly.
for b) they don't take correlations into account.
overall i'd say their analysis is very flawed. how can you talk about portfolio standard deviation without taking into account correlations?
when two things are highly correlated, their risks are almost additive.
when two things are highly negatively correlated, their risks counter act each other.
omg, and don't even get me started about 60% equity 40% bonds. that portfolio is 80% equity 20% bonds because in risk space (not even taking into acct correlations) equity risk dominates the portfolio