The second Part of the Feynman Portfolio Study looks at the performance of a fixed (unadjusted) allocation of assets selected from the 18 candidate ETF’s defined in Part 1 of the Study.
This Part of the Study starts us off where Lowell first started this Blog – looking at the benefits of diversification and “Passive” Investing.
The performance of the “Passive Feynman Portfolio” is compared to the performance of the Total US Stock Market Fund (VTSMX) over the 6-year period of the Study as characterized in Part 1.
This material is not available for publication elsewhere on the Internet.
The method of share allocation to the portfolio is described in the downloadable Word file accessible here and Platinum members are introduced to some features of the Hoadley Portfolio Analyzer and the Efficient Frontier. The method described is chosen to limit the impact of discretionary bias – i.e. rather than dictate that we should have a 60%/40% Equity/Bond portfolio we allocate a range to each asset group and allow the Optimizer to determine the “optimal” holdings within these constraints.
Details of the analysis are provided in the Word File but, overall, the analysis shows that the “Passive Feynman Portfolio” outperforms the VTSMX over the Study period (3.69% CAGR vs 1.73% CAGR) and with less volatility (risk).
Key observations are that the fixed diversified portfolio outperforms the VTSMX in Bear markets by exhibiting smaller draw-downs but underperforms the VTSMX in Bull markets.
Detailed information supporting this part of the study is provided in Appendix 1 which can be downloaded here.
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