Strategy Test 2015 – 4: March 31
It’s been a full quarter since I started testing a few different portfolio strategies as explained in this post. Here’s the next update.
The first quarter overall was very positive, as you can see. The best performer is the all-stock Trending Value portfolio, the worst is the risk parity approach although it does what it is supposed to: it reduces risk, as is evident by the smooth curve. AAA is also very smooth so far. DM and Trending Value are the most volatile.
Here are the results for Sharpe and total return:
For Sharpe, the best portfolio strategies this year are:
- Trending Value / X (=my own portfolio, basically 65% TV + 35% bonds & gold & cash)
* Adaptive Asset Allocation
Surprisingly, Risk Parity did not do as well in this regard.
In terms of return, the winners are the same ones as for Sharpe, but the Permanent Portfolio also did very well (2nd place in terms of return).
The most obvious from these stats so far are, in my opinion, that two strategies are clearly superior: my own portfolio (called ‘X’ in the graph, basically 65% TV + 35% bonds & gold & cash) and pure Trending Value. So the Trending Value method clearly seems to have an edge, both in terms of return and risk. That’s great because it is among the most tedious to implement so it’s nice to see a reward for that work. Here’s the evolution of my own portfolio:
After TV, the best choice so far seems to be AAA and a simple 60/40 portfolio. If this remains this way for the rest of the year (and in the future) then AAA will be useless, because it’s also very tedious to implement. So if a simple 60/40 allocation using 2 ETFs does the same thing, there is no use to stick with AAA. But we’ll see. It is, by the looks of the portfolio evolution below, the smoothest of all so far.
Compare this with Dual Momentum and Risk Parity, which are much more jagged: