Studies of Life

Learning by doing.

Strategy Test 2015 – 2: January 30

31 January 2015 by Jim

It’s been a month since I started testing a few different portfolio strategies as explained in this post. Here’s an update on the results so far.

January Chart


As you can see, overall January has been a very positive month. Compared to the Dow Jones and the DAX, you can see that while performance has not been quite as good as the DAX, it’s been a lot better than the DJI. However, the DAX is a pure stock index and the portfolios tested are not, except for the Trending Value portfolio of course.

DJI and DAX in January 2015


Here are the results for the Sharpe ratio and total return for this month:

Test Return JanuaryTest Sharpe January






As you can see, the best absolute return came from: 1. Permanent Portfolio – 2. My Portfolio (X) – 3. Adaptive Asset Allocation (AAA) / Risk Parity / Trending Value (all very close to each other). And the best Sharpe ratio came from: 1. Permanent Portfolio – 2. Risk Parity – 3. Adaptive Asset Allocation / Dual Momentum / My Portfolio (very close to each other again).

The losers seem to be, so far, for being worst in absolute return or in Sharpe, the 60/40 portfolio and Trending Value. The winners are right now clearly the Permanent Portfolio and (without taking into account my own portfolio) the Adaptive Asset Allocation and Risk Parity strategies. These two show very similar statistics, which is to be expected, because the methods are very similar (even though the current positions in the two virtual portfolios I am tracking are not the same at all, so this does not explain it!) but they’re both based on allocating risk and not just capital.

The Permanent portfolio has had a great run due to the recovery of gold in January, I don’t know what its performance would look like without this huge uptrend, but overall it is supposed to be very stable, much more so than other strategies, even when the road gets bumpy.

Gold vs DJI in January 2015



Personal Conclusions

My own portfolio is already inspired by the Permanent Portfolio since I hold bonds, cash and gold besides my stock positions. But right now my gold and cash allocations are slim – if the Permanent Portfolio continues this great run, I’ll increase their relative share to get closer to 25/25/25/25 even though I will not reach it, because I think that fundamentally, gold is not productive (there is no added value, dividend or obvious growth opportunity). Overall it seems like the Risk Parity / Adaptive Asset Allocation strategy adds real value. So I might, next time I rebalance in mid-2015, decide to use a risk parity or minimum variance allocation in my own portfolio, or possibly allocate a chunk of my portfolio to AAA.

Leave a comment | Categories: Investing | Tags: , , , ,

Leave a Reply