The Conservative Portfolio aims to preserve your capital with a secondary objective of growth. It may be suitable for people in their 60s, who are in late stage of wealth accumulation and early stage of retirement . The static portfolio targets 40% in risk assets such as equity, commodity, real estate and energy master trust and 60% in bonds as strategic long-term allocations. The dynamic portfolio has 40% in risk asset on average, though the allocations on risk assets vary across different stages of economic and market cycles. Historically, this strategy delivered 12% annual return with a 11% drawdown. The following are the backtesting results based on monthly data since 1970.
Long Term Performance Compared to Benchmark (40% S&P 500 +60% Barclays Aggregate Bond Index)
Portfolio Composition in 12/2011
| Equities | Static | Dynamic | ||
|---|---|---|---|---|
| SPY | US Large Cap | 15% | 9% | |
| IWM | US Small Cap | 15% | 9% | |
| EFA | Developed Market Equity | 15% | ||
| VWO | Emerging Market Equity | 15% | ||
| Dividend Assets | ||||
| IYR | US REIT | 5% | ||
| AMJ | US Energy Master Trust | 5% | 9% | |
| Commodities | ||||
| GLD | Gold | 5% | ||
| GSG | Commodity | 5% | ||
| Bonds | ||||
| HYG | US High Yield | 5% | 21% | |
| AGG | US Bond | 5% | 29% | |
| TIP | US Treasury Inflation Indexed Bond | 5% | 11% | |
| IEF | US Treasury Bond | 5% | ||
| TLT | US Long Term Treasury Bond | 11% | ||
| SHY | US Short Term Bond |
Two-year Monthly Performance
Forty-year Annual Performance
Portfolio Performance Statistics
| Static | Dynamic | Benchmark | |
| Average Monthly Return | 0.79% | 1.00% | 0.72% |
| Monthly Standard Deviation | 2.0% | 1.8% | 2.1% |
| Annualized Return | 9.4% | 12.0% | 8.6% |
| Annualized Standard Deviation | 6.8% | 6.4% | 7.3% |
| Sharpe Ratio (Risk-free Rate = 5.5%) | 0.6 | 1.0 | 0.4 |
| Maximum Drawdown (Loss) | 24% | 11% | 18% |
| Expected Time to Recover (yrs) | 2.6 | 0.9 | 2.1 |
