In Part 3 of the Feynman Portfolio Study we look at the impact of rebalancing on portfolio performance.
Part 2 examined the “Passive” – Buy and Hold – Investment strategy. Part 3 moves on to examine the “Dynamic” – Buy….Don’t Hold, re-balance – strategy.
The Hoadley Portfolio Analyzer is used to determine the optimized unleveraged portfolio at each valuation/re-balance date and the portfolio is adjusted to the new asset allocations.
Performance of the “Dynamic” Feynman Portfolio is compared to the performance of the VTSMX (Part 1) and to the “Passive” Feynman Portfolio (Part 2). Based on market behavior in the 6-year Study period it would appear that there is little benefit to be gained from rebalancing an optimized portfolio.
Part 3 also expands on the concepts of optimization and examines the movement of the Efficient Frontier as market conditions change.
The analysis is comprehensive and maybe a little complex/confusing for some readers – I have tried to keep the main text as simple and easy to understand as possible and to focus on practical applications, rather than theoretical/technical issues, to the extent that this is possible considering the theoretical/technical nature of the tools/techniques being used. For those members interested in looking at the detail for a better understanding, I have made some suggestions as to what to look for in the detailed appendices.
Part 3 of the Feynman Portfolio Study can be downloaded here and the detailed supporting data that is provided in Appendix 2 is available here.
In case readers missed Lowell’s comment regarding the data downloaded into the Hoadley Portfolio Analyzer, I would like to confirm that it is, in fact, “adjusted” data i.e. it is adjusted to reflect dividend payments and splits. Thus, my statement in Part 1 that dividends are excluded, is incorrect – the performance does reflect “total returns”. The revised Part 1 Wordfile document can be downloaded here.
Lowell,
2 websites and a “new” post here on Feynman Part 3 versus Feynman 6.2.4 in “old” site leaving me (perhaps others) a bit confused. The above has MDD of 36% and 6.2.4 (published a couple weeks back) about 4%. Are you rewriting the entire Feynman study for the new site? If one looks at sequence of this excellent/thoughtful and now a “new” post today it looks like we are going backward fast. Maybe a quick outline of various bounds (static, balanced, momentum etc.) and optimized/unoptimized states and “triggers” (ranking, momentum, SHY filter etc.) to clarify a bit with each Feynman study is studying. Don’t think many will be creating a system as outlined in today’s Feynman study with 36% MDD. Sorry if the move to new site is making for a bit more confusion. Great work by David and you. Is the “non-Hoadley” SS for the Feynman studies available to Platinum members yet?
Bob
Bob,
Let me clarify – if possible. 🙂 There is likely to be some confusion as I migrate from one blog site to another. This is going to take time and I am not in a big hurry as my contract with the original host company does not expire until 5/1/2014. Even then, I hope to keep the old material active as I would rather not transport 1000+ blog posts over to the new site.
One of the main reasons for the new website is that a new programming language is recommended so the site will be easier to read on iPADs and iPhones. In addition, I can reduce expenses while gaining additional storage space. I more than triple the storage space, not a trivial increase. Last – the current site is unstable and frequently crashes. No one has been able to figure why the instability.
Now about The Feynman Study. This is important material and I am moving as much critical material from the current site to the new site. The Feynman Study will show up over the next few days as David presented it. It is a direct copy and I am not rewriting any of the posts showing up here on the new site. We are not going backwards. Rather, it is a repeat of material from the current blog as I don’t want to lose this material.
In the menu tabs I am creating something I call the Library. Over time I will build links to critical blog posts. This is going to take a lot of time, but I think it will be of value once I place more “books” in the Library. Readers need to be patient.
I’m not sure if I covered everything. Yes, the latest Rankings SS is available to Platinum members and the link is available on the current site. I think I entered it in a recent comment.
Lowell
Lowell,
Thanks for the clarification and understand. Track the study by the numbering sequence and not worry about date posted on the new site. Look forward to accessing via a tablet
Bob
Bob,
Exactly. The Feynman Study on this website should show up in the same order as David originally posted them on the current site.
Lowell