Conservative Portfolio

Yesterday, a user of the Quantext Portfolio Planner posted a conservative portfolio made up of some core ETFs and a number of individual stocks. Using slightly different assumptions, the Portfolio Report is shown below and further down the page is the "Delta" worksheet, something I have not posted for weeks. While the projected Return/Risk ratio is low (6.76/8.71), one is not going to match the projected 7.3% return of the S&P 500. The Diversification Metric is a high 56%. Adding the individual stocks helps the DM value. In order to raise the projected return, one will need to take more risk and when we do this, the Return/Risk ratio is likely to mover lower than the 0.78 value of this conservative portfolio.


The following worksheet is what I call the Delta worksheet as it shows what ETFs are possible buys based on reversion-to-the-mean analysis. [Read more…]