Find out if this model is a good fit for your own personal objectives and risk tolerance:
Target Max Loss
The model seeks to participate to a substantial degree in the gains of equities during bull markets while avoiding most losses during bear markets and limiting portfolio losses in general.
As a secondary objective, it seeks a low correlation with the S&P 500 index over the long term.
Chart of Drawdowns
Model design puts a central emphasis on keeping losses as low as possible relative to the return objective. The charts below show the distribution of losses over time for the AERIUS model. Losses of the S&P500 index are presented as a reference.
The amount of time it takes a portfolio to recover from a loss can be measured in the chart as the distance between consecutive points where the plot touches the zero level.
The following chart is the same as the one before but has a linear vertical scale. Each level increment represents an equal change from the previous level in dollar terms. Recent growth appears artificially magnified as the portfolio value increases.
However, this type of chart is useful in understanding the compounding effects of the performance differences and the importance of long-term investing.
The table above shows the current multiple of the initial investment starting in 1987 or the same amount invested starting in year 2000. The initial investment can be any amount but $1 mil is used for convenience.
One measure of risk is the maximum percentage loss over the entire time studied. The percentages in the following table show the maximum loss from the highest value achieved up to that date.
The following table shows performance over various time periods until present:
Conventional statistics of risk and return include standard deviation of annualized returns. The next table also presents the correlation of the model with the S&P500 over the entire period starting with 1987 and, separately, since year 2000.
the AERIUS COMFORT model
The model employs an active asset allocation strategy and a proprietary security selection filter to achieve its risk and return objectives. Securities include stocks, bonds, mutual funds and ETFs.
Asset allocation and rebalancing is based on the Risk Signal. During Risk OFF periods, the portfolio is invested entirely in a combination of municipal bonds and treasury bonds. During Risk ON periods, a large portion of the bond holdings are liquidated and reallocated to a basket of stocks. Bond positions are typically implemented via low cost mutual funds or ETFs.
In general, when the stock market declines, investments in high-quality bonds tend to increase in value. Bonds also provide a total return through coupon interest payments.
Find out if this model is a good fit for your own personal objectives and risk tolerance.
This strategy is suitable for investors who have one or more of the following objectives:
Capture the bulk of equity returns during bull markets
Have a substantially lower risk of loss during bear markets
Generate high growth and income from portfolios
Have more consistent returns over multiple market cycles
All investors considering this strategy must be able and willing to take moderate risk. It is also recommended that investors have a time horizon longer than two years for the majority of funds invested.
Results Since Year 2000
The period of time since year 2000 is interesting because it includes two major market crashes. Zooming-in to analyze the performance of the model relative to the stock market represented by the S&P 500 is informative.
As before, the same data is shown in two chart types: logarithmic, above and linear, below.
Live Trading of the Model
The current version of the model has been used to manage client assets since the start of 2016. A chart showing the performance of the model since that time is shown here.
Model Historical Testing Results
The following tables and graphs show the simulated performance of the model going as far back as data available. Periods when the model is in Risk OFF mode are designated by the green bars.
This performance is hypothetical using a retractive application of the models with the benefit of the hindsight. No actual accounts have been invested using these models before January 2016. Performance prior to Jan 2016 is gross of fees. After Jan 2016, performance is net of fees. See important disclosures.
The chart above has a logarithmic vertical scale as this normalizes the performance display over long periods of time. Vertical distances represent the same percentage change, not dollar amount change, as they do in common linear charts. For example, the change from $2 to $4 is the same 100% increase as the change from $16 to $32. Each vertical unit between two lines is a doubling of value when increasing and a 50% decrease in case of decline.
The vertical scale on the left shows the multiples of the initial investment which can be any amount such as $1mil, $10 thousand or $265 thousand.