Darwin Portfolio Review: 7 October 2022

For the Physicists amongst us 🙂 – Refractor Telescope at Lovell Observatory, Flagstaff, Arizona.

The Darwin Portfolio is a “Buy-And-Hold” Portfolio, adjusted occasionally (~quarterly), for risk parity.

Performance since inception has been poor:

or, in stacked format:

At present the portfolio is holding 9 shares in VTI, 18 shares in VSS, 20 shares in VNQ, 15 shares in TLT and 17 shares in GLD. For diversification the portfolio also holds in SVXY – a volatility ETF – but this is not risk adjusted like the other 5 assets. Current analysis results in the allocations shown in the following screenshot:

Since this portfolio has not been adjusted for 3 months I will make a small adjustment by selling 3 shares of VSS and buying 4 shares of TLT. The other assets are close enough and it is not worth the costs of making other minor adjustments. This weights the portfolio slightly in favor of Bonds and Commodities.

I mentioned that performance since inception has been poor and is presently showing a negative IRR of a little under 26%. This is a result in bad timing for starting this portfolio (luck) and (probably) a too aggressive volatility target (10% per asset rather than 3-4% that would be far more conservative) and the use of leverage (~35%). This is a small portfolio so I am not going to change the parameters since we can not then evaluate the system with any degree of confidence. If/when we see a recovery we will see whether we can regain the lost ground.

This is not my favorite strategy (hence the small size of the portfolio) but this does not mean that it is a bad strategy – particularly for a young investor with a longer term time horizon that I have.

David