Portfolio Charts

[ochotona]

That brings up a good point, the Charts are missing one key computation... the Sharpe Ratio. Computing that one would add lots of value.

[Tyler]

Thanks for the suggestions.

Expanding the assets is something on my radar, and perhaps I'll add a few after I roll out some other things I'm working on. 

I'm also interested in the Sharpe ratio, but am waiting until I can think of an intuitive way to utilize it that the average investor can understand.  Esoteric ratings may make perfect sense to many people but don't always translate well to a larger audience.  Honestly even standard deviation is borderline for me, which it why I always use a pixel chart when discussing volatility rather than throw out a single number that most people wouldn't really understand and that hides a lot of important information anyway (such as when an asset tends to struggle).

As I mentioned earlier, I'm playing with optimization tools but am being very careful about over-selling the results.  But for conversation purposes, I figure you guys will find this one interesting -- here's a chart of the minimum and median 10-year real CAGRs (since 1972) of every combination of stocks, bonds, gold, and cash (minimum 10% each, 5% increments).  The red dot represents the 4x25 version.  Harry Browne was a smart man. 

[img width=400]http://i67.tinypic.com/ix9njn.jpg[/img]

[ochotona]

Wow, very close to optimum! I'm impressed.

[Reub]

Nice! What was the optimum combination?

[ochotona]

42

[dualstow]

42

Which is also the meaning of life.

[Tyler]

Nice! What was the optimum combination?

For this particular timeframe and metric: 35% stocks, 25% bonds, 20% cash, 25% gold. 

But note that if you vary the metric you're studying from 10 year periods to something longer or shorter or if you change the data set to a different start year than 1972, the optimized percentages will also change.  Thus the quandry with how to present optimization data -- there are lots of assumptions involved. 

Still, I do think this reinforces pretty well that the 4x25 is a quite reasonable portfolio for downside protection even over short to mid terms. 

[Dieter]

Have you thought of reporting the optimum for different start/end periods? Might highlight that there isn't a set optimum....

One set:
  All start 1972
  End points: 82, 92, 2002, 2012, 2015

Other set:
  Start 72, 82, 92, 2002
  End 2015

And then with your remaining copious free time, optimum at the end of all available 20 year periods starting 1/1....

[Tyler]

I'm still playing with a few ideas.  They're just on the back burner for now.   

I'll probably circle back around after I finish some other updates I'm working on. 

[Reub]

Tyler that adds up to 105%.

Ocho, I didn't ask for your waist size!

[Tyler]

Tyler that adds up to 105%.

What -- you don't like my optimized 105% portfolio? 

Yeah, I mis-typed.  it's 30% stocks.

[dragoncar]

Tyler that adds up to 105%.

What -- you don't like my optimized 105% portfolio? 

Yeah, I mis-typed.  it's 30% stocks.

I actually enjoy the "ability" of your site to go over 100%.  Obviously, it's not going to count "failures" correctly, but still funs

[Tyler]

FYI -- the site has been updated with 2015 data.  Enjoy!

[MediumTex]

FYI -- the site has been updated with 2015 data.  Enjoy!

You should put a link to the site in your sig line.

[Tyler]

Good idea.  Thanks!

[MediumTex]

Good idea.  Thanks!

Do it as a hyperlink.  Make it easy.

[MediumTex]

Good idea.  Thanks!

Do it as a hyperlink.  Make it easy.

The current setup does not allow links (or images) in signatures.  I have a recollection that Craig recommended this for security purposes, though I'm not sure.

[img width=500]http://i.imgur.com/H26BY1V.png[/img]

I see.

Well, the website listed in the sig will show people the way.

[lordmetroid]

Thank you Tyler, always nice with more data.
I wholeheartedly agree, 2015 was a rough time to be an investor. Cool, that I get to experience hardship so early in my investment-career. Best timing ever!

[Reub]

Stay the course!
May the force be with you!
Something like that!

[Tyler]

So I added a new section to the site dedicated to the individual Assets themselves.  Take a look.  Of course this goes way beyond the PP assets, but perhaps people will find it helpful for their VP as well as their PP.  I could also use some extra sets of eyes on stuff like this, and I've found the group here to be particularly knowledgeable when it comes to the finer points of investing.  No need to clutter the thread with feedback, but if you spot a mistake or think I missed or flubbed something please PM me. 

You'll also probably find the working example in this post to be interesting from a PP perspective.  Sometimes it's hard to explain to people why correlations are important, but I took a decent shot using stocks and gold as an example.

Speaking of gold, I'd like to add a few notes on the top places to buy physical bullion.  What might be considered the top-3 most popular reputable dealers?

[dualstow]

Cool!

[lordmetroid]

Awesome, I love it!
Much easier to build your own portfolio now and I like the educational touch.

[BearBones]

This is so well done. And so helpful. Thanks for putting in the work and sharing with us!

[lordmetroid]

I would really really really like to have silver as an asset to choose from.

[Tyler]

Thanks!

MG actually provided silver data for me a while back.  I removed it to keep it simple, but I may add it back in the future.  It's crazy volatile, and I may need to update some of the iterative calculations to keep them from breaking.