INVESTMENT REALITY CHECK The 8 Metrics to Objectively
INVESTMENT REALITY CHECK
The 8 Metrics to Objectively Evaluate an Investment or Portfolio Rate of Return This is the rate you need to make on your portfolio in order to not lose purchasing power after subtracting your expenses, taxes, and cost of living increase. Standard Deviation This is a statistic that measures how much risk you are taking versus your return. The lower the number, the better. Variance Drag Phantom Tax This ratio calculates the degree of your standard deviation in proportion to your rate of return. Ideally, it will be at 0. 8 or less. Anything over 1. 5 is not acceptable. Sharpe Ratio You want this to be 1 or higher on your entire portfolio. Anything at 0. 5 or less is unacceptable. Probability of Any Loss in the Next 12 Months This is the probability that your portfolio will experience any loss during the next 12 months. It should be 15% or less. Amount of Money at Risk in the Next 12 Months Based on historical data, this identifies how much money is at risk. Upper and Lower Return You want this range of returns to be as narrow as possible. Correlation to S&P 500 Each asset relates to the S&P 500 by a correlation between -1 to 1.
S&P 500 Index Rate of Return 6. 20% Standard Deviation 15. 25% Variance Drag Phantom Tax 2. 46 Sharpe Ratio 0. 28 Probability of Any Loss Over the Next 12 Months 34. 22% Amount of Money at Risk in The Next 12 Months* $29, 277 Upper and Lower Return 36. 70% -24. 30% Correlation to S&P 500 1. 00 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 Jan-05 – Aug-15 Apr-06 May-16 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% -6 , 0 0% , 0 -8 % 00 0, -1 -1 2, 00 % % 00 4, -1 -1 6, 00 % 0
Berkshire Hathaway/Warren Buffett Rate of Return 11. 58% Standard Deviation 19. 43% Variance Drag Phantom Tax 1. 68 Sharpe Ratio 0. 49 Probability of Any Loss Over the Next 12 Months 27. 56% Amount of Money at Risk in The Next 12 Months* $27, 564 Upper and Lower Return 50. 44% -27. 28% 0. 45 Correlation to S&P 500 50 40 30 20 0 -16, 00% -15, 00% -14, 00% -13, 00% -12, 00% -11, 00% -10, 00% -9, 00% -8, 00% -7, 00% -6, 00% -5, 00% -4, 00% -3, 00% -2, 00% -1, 00% 0, 00% 1, 00% 2, 00% 3, 00% 4, 00% 5, 00% 6, 00% 7, 00% 8, 00% 9, 00% 10, 00% 11, 00% 12, 00% 13, 00% 14, 00% 15, 00% 16, 00% 17, 00% 18, 00% 19, 00% 20, 00% 21, 00% 22, 00% 23, 00% 24, 00% 25, 00% 26, 00% 27, 00% 28, 00% 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 Jan-94 – Aug-15 January 1994 – May 2016
Berkshire Hathaway – Last 10 Years Rate of Return 9. 86% Standard Deviation 17. 76% Variance Drag Phantom Tax 1. 80 Sharpe Ratio 0. 44 Probability of Any Loss Over the Next 12 Months 28. 93% Amount of Money at Risk in The Next 12 Months* $28, 934 Upper and Lower Return 45. 39% -25. 66% Correlation to S&P 500 0. 51 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 18 , 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% , 0 -6 0% , 0 -8 % 00 0, -1 -1 2, 00 % % 00 4, -1 -1 6, 00 % 0
Typical Retail Portfolio 30% 10% 5% Russell 1000 Index Russell 2000 Value Index International Markets Financials Sector Rate of Return 15% 10% 10% Bonds Index Gold Index Energy Sector Utilities Sector 8. 79% Standard Deviation 26. 16% Variance Drag Phantom Tax 2. 98 Sharpe Ratio 0. 26 Probability of Any Loss Over the Next 12 Months 36. 84% Amount of Money at Risk in The Next 12 Months* $36, 839 Upper and Lower Return 61. 12% -43. 53% Correlation to S&P 500 0. 95 50 40 30 20 10 -8 % , 0 0% -6 , 0 0% -4 , 0 0% -2 , 0 0% 0, 00 % 2, 00 % 4, 00 % 6, 00 % 8, 00 10 % , 0 0 12 % , 0 0 14 % , 0 0 16 % , 0 0% 18 , 0 0% 00 % -1 0, 00 % 2, -1 -1 4, 00 % 00 6, -1 -1 8, 00 % % 00 0, -2 -2 2, 00 % % 00 4, -2 6, 00 % % -2 -2 8, 00 % 00 0, -3 -3 2, 00 % 0 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016
D. E. Shaw Oculus Fund Rate of Return 10. 99% Standard Deviation 8. 68% Variance Drag Phantom Tax 0. 79 Sharpe Ratio 1. 04 Probability of Any Loss Over the Next 12 Months 10. 27% Amount of Money at Risk in The Next 12 Months* $10, 271 Upper and Lower Return 28. 35% -6. 37% Correlation to S&P 500 0. 19 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% -6 , 0 0% , 0 -8 % 00 0, -1 -1 2, 00 % % 00 4, -1 -1 6, 00 % 0
MSCI EAFE Index (Int’l. ) Rate of Return 3. 33% Standard Deviation 19. 13% Variance Drag Phantom Tax 5. 74 Sharpe Ratio 0. 07 Probability of Any Loss Over the Next 12 Months 43. 08% Amount of Money at Risk in The Next 12 Months* $43, 083 Upper and Lower Return 41. 60% -34. 93% Correlation to S&P 500 0. 90 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 0% 10 , 0 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% , 0 -6 0% , 0 -8 -1 0, 00 % % 00 2, -1 -1 4, 00 % % 00 6, % -1 00 8, -1 -2 0, 00 % 0
40% 25% 20% 15% 4 Institutional Funds Hudson Bay Fund Millennium Fund D. E. Shaw Oculus Fund Pershing Square Fund Rate of Return 13. 92% Standard Deviation 7. 06% Variance Drag Phantom Tax 0. 51 Sharpe Ratio 1. 69 Probability of Any Loss Over the Next 12 Months 2. 44% Amount of Money at Risk in The Next 12 Months* $2, 439 28. 04% -0. 21% Upper and Lower Return Correlation to S&P 500 0. 34 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 0% , 0 10 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% -4 , 0 0% -6 , 0 0% , 0 -8 % 00 -1 0, % 00 -1 2, % 00 4, -1 -1 6, 00 % 0
Fisher Investments Portfolio Rate of Return 3. 62% Standard Deviation 20. 31% Variance Drag Phantom Tax 5. 61 Sharpe Ratio 0. 08 Probability of Any Loss Over the Next 12 Months 42. 93% Amount of Money at Risk in The Next 12 Months* $315, 927 44. 24% -37. 00% Upper and Lower Return Correlation to S&P 500 0. 92 50 40 30 20 10 Monthly Returns/Number of Occurrences January 2006 – December 2016 *Starting Portfolio Value: $100, 000 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% , 0 -6 0% , 0 -8 -1 0, 00 % % 00 2, -1 -1 4, 00 % % 00 -1 6, % 00 8, -1 -2 0, 00 % 0
40% 20% 10% 5 Institutional Funds Millennium Fund Citadel Kensington Fund Pershing Square Fund Two Sigma Fund Balyasny Atlas Fund Rate of Return 10. 01% Standard Deviation 5. 90% Variance Drag Phantom Tax 0. 59 Sharpe Ratio 1. 36 Probability of Any Loss Over the Next 12 Months 4. 50% Amount of Money at Risk in The Next 12 Months* $4, 499 21. 81% -1. 80% Upper and Lower Return Correlation to S&P 500 0. 58 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% -6 , 0 0% , 0 -8 % 00 0, -1 -1 2, 00 % % 00 4, -1 -1 6, 00 % 0
Millennium Fund Rate of Return 9. 44% Standard Deviation 3. 77% Variance Drag Phantom Tax 0. 40 Sharpe Ratio 1. 97 Probability of Any Loss Over the Next 12 Months 0. 62% Amount of Money at Risk in The Next 12 Months* $617 16. 98% 1. 89% Upper and Lower Return Correlation to S&P 500 0. 28 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% -6 , 0 0% , 0 -8 % 00 -1 0, % 00 -1 2, % 00 4, -1 -1 6, 00 % 0
Separately Managed Account 30% Brookdale Defensive Long 10% DCCP Long/Short 20% Pawleys Growth 10% Pawleys Dividend 30% Probabilities Long/Short Rate of Return 18. 27% Standard Deviation 11. 46% Variance Drag Phantom Tax 0. 63 Sharpe Ratio 1. 42 Probability of Any Loss Over the Next 12 Months 5. 54% Amount of Money at Risk in The Next 12 Months* $5, 543 41. 18% -4. 65% Upper and Lower Return Correlation to S&P 500 0. 59 50 40 30 20 10 Monthly Returns/Number of Occurrences *Starting Portfolio Value: $100, 000 June 2006 – May 2016 00 % 16 , 00 % 14 , 00 % 12 , 00 % 10 , 0% 8, 0 0% 6, 0 0% 4, 0 0% 2, 0 0% 0, 0 0% , 0 -2 0% , 0 -4 0% -6 , 0 0% , 0 -8 % 00 0, -1 -1 2, 00 % % 00 4, -1 -1 6, 00 % 0
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