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You are here: Home / Feynman Study / The Feynman Study: Part 3

The Feynman Study: Part 3

September 7, 2013 By Lowell Herr

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.

The Feynman Study: Part 3 1Performance 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.

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Comments

  1. Robert Ryan says

    September 7, 2013 at 9:46 AM

    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

    • Lowell Herr says

      September 7, 2013 at 10:03 AM

      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

  2. Robert Ryan says

    September 7, 2013 at 9:17 PM

    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

    • Lowell Herr says

      September 8, 2013 at 8:30 AM

      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

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