Apr 10
Passive Portfolios vs. VTSMX Benchmark
How well are the passive portfolios performing when measured with respect to Vanguard’s Total Stock Market Index Fund, VTSMX? The table below details the numbers for the different portfolios. For many portfolios, I have data using both the TLH spreadsheet and Captool. If there are questions involving the different starting dates and the different programs used to track the portfolios, I can provide that information.
Historical Portfolio Data: April 9, 2009
| Portfolio | Last Updated | Launch Date | Tracking Tool | Port. IRR | VTSMX IRR | IR |
|---|---|---|---|---|---|---|
| AA-Mosaic | 3/31/2009 | 7/21/1999 | Captool | -2.06% | -4.56% | 0.05 |
| AA-Mosaic | 4/9/2009 | 12/26/2007 | TLH SS | -25.0% | -35.7% | *** |
| Mosaic2 | 3/31/2009 | 7/19/1999 | Captool | 0.7% | -4.71% | 0.15 |
| Mosaic2 | 4/9/2009 | 6/02/2008 | TLH SS | -25.6% | -35.4% | *** |
| Passive Port. | 3/31/2009 | 12/01/2000 | Captool | -1.36% | -4.72% | 0.69 |
| Passive Port. | 4/9/2009 | 02/01/2000 | TLH SS | -0.1% | -2.8% | *** |
| Jane | 3/31/2009 | 2/14/1997 | Captool | 3.92% | -3.71% | 0.38 |
| Jane | 4/9/2009 | 6/30/2008 | TLH SS | -24.0% | -33.9% | *** |
| Gauss | 3/31/2009 | 2/19/1997 | Captool | -2.44% | -3.71% | 0.01 |
| Gauss | 4/9/2009 | 11/01/2008 | TLH SS | 2.2% | -14.5% | *** |
| Scrappy | 3/31/2009 | 8/14/2008 | Captool | -26.75% | -54.44% | *** |
| Scrappy | 4/9/2009 | 8/14/2008 | TLH SS | -18.0% | -44.4% | *** |
| AEM | 4/9/2009 | 12/20/2006 | TLH SS | -18.0% | -17.7% | *** |
| Projects | 3/31/2009 | 12/01/2000 | Captool | 2.15% | -5.59% | 1.36 |
| 1 | 3/31/2009 | 6/18/1999 | Captool | 0.33% | -4.27% | 0.26 |
| 2 | 3/31/2009 | 6/18/1999 | Captool | .67% | -4.27% | .67 |
| 3 | 3/31/2009 | 3/13/2008 | Captool | -23.9% | -37.83% | *** |
What should one look for in this table of numbers? Check out the results for the older portfolios such as the Passive Portfolio, Jane, Gauss, and Projects Portfolio. Note that only one portfolio, the AEM, is lagging the VTSMX benchmark. This is one of the few portfolios where the asset allocation percentages are not skewed toward the value side of the investing spectrum.
All the portfolios you see tracked by the TLH spreadsheet are available for examination by Premium subscribers. The asset allocation targets are available for all seven portfolios. The above data is to illustrate that portfolios of various sizes started at different times will perform near or slightly above the VTSMX benchmark if they are built on a sound strategic asset allocation plan. Many of the new portfolios, while showing heavy losses, are also performing well above the benchmark. As time progresses, expect to see these huge differences begin to shrink. Short investing periods will exacerbate slight changes in the portfolio value and are therefore not as useful. Therefore, concentrate your attention on the older portfolios.
Pay attention to the Information Ratio if available. Again, the older the portfolio the more significant this value becomes. Anything over zero is very good, above 0.5 is excellent, and a number over 1.0 is stellar. The reason the Projects Portfolio has such a high IR value is due to all the cash in the portfolio. Cash contributed to low volatility so the denominator of the IR ratio was very low. Holding cash in a severe bear market served the portfolio well so the numerator was quite high, at least on a relative basis. That is why the IR value is so high for the Projects Portfolio.
Queries are most welcome so post your questions in the comments section below this post.
Lowell Herr
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