What a year.
There were ups, serious downs, and serious ups again. Truly a roller coaster for investors. The kind of year that takes investing strategies, especially those built around numbers, and tears them apart. It’s hard to use the past to prepare for the future, especially when that future has never happened before.
So how did Geometric Balancing handle the ride?
The Results
Since I tweaked my real investment portfolio in the summer to be slightly different than the blog, I can’t rely on the broker statement to show the collective annual performance. So these results are calculated from the weekly updates (see below for historical positions).
Calculations are my own. Theoretical returns shown do not include trading costs. They do not include any fees. Past performance is not indicative of future performance. Dividends are re-invested.
Per the backtest, this was a good year in almost every metric. I don’t expect 15% return with a 1.5 Sharpe ratio in the future.
As far as lessons learned, the election was certainly a difficult stretch. The strategy doesn’t really get whipsawed in the traditional sense. But the violent reaction down into the election and then up out of it, did trip the strategy up in a similar manner.
My favorite result: the single digit drawdown. My second favorite: the strategy didn’t run and hide after things got ugly. Sure it was conservative for a bit after the crash, but it was still able to gain 20% through the spring and summer.
There are plenty of investors who handily beat these return numbers. Some rode these amazing waves to spectacular returns. Others didn’t fair as well. I suspect 2020 will go down as having one of the largest spreads of investor outcomes ever.
So while there will be many who matched and surpassed this return, I think you will find far fewer that did so with low volatility and a single digit drawdown.
Portfolio Construction Lessons
The key lessons from this blog, and in my opinion the key reasons Geometric Balancing navigated 2020 with solid returns and low volatility can be summed up as follows:
- Choose uncorrelated assets
- Monitor volatility and correlation of those assets
- Build portfolios along the geometric efficient frontier
- Rebalance frequently
The blog publishes a specific portfolio that meets those constraints that I favor. It’s not necessarily the best combination for someone else. Many, many other potential strategy combinations could produce similar, or better returns. There’s enough freedom within those bounds to personalize a portfolio to your own hopes and dreams, one that provides reasonable returns with manageable lower stress drawdowns.
Explore the blog, see if the concepts can help.
Weekly Update
Up nearly a percent for the week. Almost reached a new weekly high, but just fell short. Going to have to wait for 2021 for that (hopefully). On December 31st, the strategy rebalanced to:
60% SPY , 24% TLT , 16% GLD
*All investing strategies come with the risk of loss, including this one. This portfolio may not be appropriate for your investment goals and requirements, and it is not investment advice.
It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.
Calculations are my own. Returns shown do not include trading costs. They do not include any fees. Past performance is not indicative of future performance. Dividends are re-invested.