Dec 11
Passive Portfolio Analysis
Over on the Premium Content side of this blog, I provide analysis and information on several active portfolios. One such portfolio is the Passive Portfolio (PP), in operation for eight years. In the following “movie” you will see the ETFs used to populate this portfolio and the target percentages for each asset class.
When this portfolio was launched back on 11/30/2000, analytical tools were not available for the small investor. At least none that I could afford. With help from QPP, I now realize the PP is anything but a well diversified portfolio. Even though the investments are spread all over the world, the diversification metric (DM) is only 9%. We prefer to see this value over 40% and higher.
The analysis indicates the portfolio should outperform the S&P 500 by approximately 2% annually. This is what has happened over the last eight years as the IRR for the PP is -0.6% while the VTSMX benchmark lagged at -2.6%. Outperforming the S&P 500 by two percentage points over eight years is to be commended. All the transaction details for PP are available on a SS if one is a Premium member.
How to increase diversification, increase projected return, and reduce projected risk is the work for a portfolio contractor. That is what we are trying to design with the seven active portfolios.
Lowell Herr
Photograph: Amsterdam, The Netherlands – typical canal scene
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