Backtest Portfolio Asset Class Allocation

Asset Class Allocation Overview

This portfolio backtesting tool allows you to construct one or more portfolios based on the selected asset class level allocations in order to analyze and backtest portfolio returns, risk characteristics, drawdowns, and rolling returns. You can compare up to three different portfolios against the selected benchmark, and you can also specify any periodic contribution or withdrawal cashflows and the preferred portfolio rebalancing strategy.

You can also use the portfolio backtesting tool to build and compare portfolios based on specific mutual funds, ETFs, and stocks.

Portfolio Model Configuration

Portfolio View

Time Period

Start Year

First Month

End Year

Last Month

Calendar Aligned

Include YTD

Initial Amount

$ .00

Cashflows

Contribution Amount

$ .00

Inflation Adjusted

Withdrawal percentage

Frequency

Rebalancing

Absolute Deviation

Relative Deviation

Leverage Type

Leverage Ratio

Debt Amount

$ .00

Debt Interest

Maintenance Margin

Leveraged Benchmark

Benchmark

Benchmark Ticker

Portfolio Names

Portfolio #1

Portfolio #2

Portfolio #3

Asset Class Allocation

Asset Allocation

Asset Class

Portfolio #1

Portfolio #2

Portfolio #3

Asset 1

Asset 2

Asset 3

Asset 4

Asset 5

Asset 6

Asset 7

Asset 8

Asset 9

Asset 10

Total

Portfolio Analysis Results (Apr 2004 - Sep 2006)

GBFly with TIPS

Asset Class	Allocation
US Large Cap Growth	20.00%
US Small Cap Value	20.00%
Long Term Treasury	20.00%
Gold	20.00%
TIPS	20.00%
Save portfolio »

GBFly with ST Treasuries (original)

Asset Class	Allocation
US Large Cap Growth	20.00%
US Small Cap Value	20.00%
Long Term Treasury	20.00%
Gold	20.00%
Short Term Treasury	20.00%
Save portfolio »

GBFly with IT Treasuries

Asset Class	Allocation
US Large Cap Growth	20.00%
US Small Cap Value	20.00%
Long Term Treasury	20.00%
Gold	20.00%
Intermediate Term Treasury	20.00%
Save portfolio »

Performance Summary

Portfolio performance statistics
Portfolio	Initial Balance	Final Balance	CAGR	Stdev	Best Year	Worst Year	Max. Drawdown	Sharpe Ratio	Sortino Ratio	Market Correlation
GBFly with TIPS	$10,000	$12,117	7.98%	6.38%	7.57%	5.73%	-5.11%	0.76	1.13	0.77
GBFly with ST Treasuries (original)	$10,000	$12,055	7.76%	6.10%	7.45%	5.08%	-4.41%	0.76	1.17	0.80
GBFly with IT Treasuries	$10,000	$12,065	7.80%	6.22%	7.55%	5.16%	-4.82%	0.75	1.13	0.78

Portfolio Growth

Annual Returns

Trailing Returns

Trailing Returns
Name	Total Return			Annualized Return
Name	3 Month	Year To Date	1 year	Full
GBFly with TIPS	2.10%	6.54%	9.65%	7.98%
GBFly with ST Treasuries (original)	1.85%	6.78%	10.07%	7.76%
GBFly with IT Treasuries	2.17%	6.68%	9.96%	7.80%
Trailing returns are as of last calendar month ending September 2006

Notes and Disclosures

IMPORTANT: The projections or other information generated by Portfolio Visualizer regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.
The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities. All use is subject to terms of service.
Investing involves risk, including possible loss of principal. Past performance is not a guarantee of future results.
Asset allocation and diversification strategies do not guarantee a profit or protect against a loss.
Hypothetical returns do not reflect trading costs, transaction fees, commissions, or actual taxes due on investment returns.
The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
Refer to the related documentation sections for more details on terms and definitions, methodology, and data sources.
Portfolio model information represents a blended portfolio consisting of the model's underlying positions and assigned weights provided by the user and rebalanced at the specified schedule. The results were constructed using net of fee mutual fund performance. Portfolio Visualizer does not provide preferential treatment to any specific security or investment.
The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
Compound annualized growth rate (CAGR) is the annualized geometric mean return of the portfolio. It is calculated from the portfolio start and end balance and is thus impacted by any cashflows.
The time-weighted rate of return (TWRR) is a measure of the compound rate of growth in a portfolio. This is calculated from the holding period returns (e.g. monthly returns), and TWRR will thus not be impacted by cashflows. If there are no external cashflows, TWRR will equal CAGR.
The money-weighted rate of return (MWRR) is the internal rate of return (IRR) taking into account cashflows. This is the discount rate at which the present value of cash inflows equals the present value of cash outflows.
Standard deviation (Stdev) is used to measure the dispersion of returns around the mean and is often used as a measure of risk. A higher standard deviation implies greater the dispersion of data points around the mean.
Sharpe Ratio is a measure of risk-adjusted performance of the portfolio, and it is calculated by dividing the mean monthly excess return of the portfolio over the risk-free rate by the standard deviation of excess return, and the displayed value is annualized.
Sortino Ratio is a measure of risk-adjusted return which is a modification of the Sharpe Ratio. While the latter is the ratio of average returns in excess of a risk-free rate divided by the standard deviation of those excess returns, the Sortino Ratio has the same denominator divided by the standard deviation of returns below the risk-free rate.
Treynor Ratio is a measure of risk-adjusted performance of the portfolio. It is similar to the Sharpe Ratio, but it uses portfolio beta (systematic risk) as the risk metric in the denominator.
Calmar Ratio is a measure of risk-adjusted performance of the portfolio. It is calculated as the annualized return over the past 36 months divided by the maximum drawdown over the past 36 months based on monthly returns.
Risk-free returns are calculated based on the Federal Reserve 3-Month Treasury Bill (secondary market) rates.
Downside deviation measures the downside volatility of the portfolio returns unlike standard deviation, which includes both upside and downside deviations. Downside deviation is calculated based on negative returns that hurt the portfolio performance.
Correlation measures to what degree the returns of the two assets move in relation to each other. Correlation coefficient is a numerical value between -1 and +1. If one variable goes up by a certain amount, the correlation coefficient indicates which way the other variable moves and by how much. Asset correlations are calculated based on monthly returns.
Skewness is a measure of the asymmetry of the probability distribution or returns from a normal Gaussian distribution shape about its mean. Negative skewness is associated with the left (typically negative returns) tail of the distribution extending further than the right tail; and positive skewness is associated with the right (typically positive returns) tail of the distribution extending further than the left tail.
Excess kurtosis is a measure of whether a data distribution is peaked or flat relative to a normal distribution. Distributions with high kurtosis tend to have a distinct peak near the mean, decline rather rapidly, and have heavy or fat tails.
A drawdown refers to the decline in value of a single investment or an investment portfolio from a relative peak value to a relative trough. A maximum drawdown (Max Drawdown) is the maximum observed loss from a peak to a trough of a portfolio before a new peak is attained. Drawdown values are calculated based on monthly returns.
Value at Risk (VaR) measures the scale of loss at a given confidence level. For example, if the 95% confidence one-month VaR is 3%, there is 95% confidence that over the next month the portfolio will not lose more than 3%. Value at Risk can be calculated directly based on historical returns based on a given percentile or analytically based on the mean and standard deviation of the returns.
Conditional Value at Risk (CVaR) measures the scale of the expected loss once the specific Value at Risk (VaR) breakpoint has been breached, i.e., it calculates the average tail loss by taking a weighted average between the value at risk and losses exceeding the value at risk.
Beta is a measure of systematic risk and measures the volatility of a particular investment relative to the market or its benchmark. Alpha measures the active return of the investment compared to the market benchmark return. R-squared is the percentage of a portfolio's movements that can be explained by movements in the selected benchmark index.
Active return is the investment return minus the return of its benchmark. For periods longer than 12 months this is displayed as annualized value, i.e., annualized investment return minus annualized benchmark return.
Tracking error, also known as active risk, is the standard deviation of active return. This is displayed as annualized value based on the standard deviation of monthly active returns.
Information ratio is the active return divided by the tracking error. It measures whether the investment outperformed its benchmark consistently.
Gain/Loss ratio is a measure of downside risk, and it is calculated as the average positive return in up periods divided by the average negative return in down periods.
Upside Capture Ratio measures how well the fund performed relative to the benchmark when the market was up, and Downside Capture Ratio measures how well the fund performed relative to the benchmark when the market was down. An upside capture ratio greater than 100 would indicate that the fund outperformed its benchmark when the market was up, and a downside capture ratio below 100 would indicate that the fund lost less than its benchmark when the market was down. To calculate upside capture ratio a new series from the portfolio returns is constructed by dropping all time periods where the benchmark return is less than equal to zero. The up capture is then the quotient of the annualized return of the resulting manager series, divided by the annualized return of the resulting benchmark series. The downside capture ratio is calculated analogously.
All risk measures for the portfolio and portfolio assets are calculated based on monthly returns.
The annual results for 2004 are based on monthly returns from April to December.
The annual results for 2006 are based on monthly returns from January to September.
The results assume no rebalancing of portfolio assets per parameterization. See the allocation drift section for details.
Portfolio cashflows and rebalancing for quarterly and annual periods are aligned with calendar periods.

Annual Returns

Annual returns for the configured portfolios
Year	Inflation	GBFly with TIPS		GBFly with ST Treasuries (original)		GBFly with IT Treasuries		US Large Cap Growth	US Small Cap Value	Long Term Treasury	Gold	TIPS	Short Term Treasury	Intermediate Term Treasury
Year	Inflation	Return	Balance	Return	Balance	Return	Balance	US Large Cap Growth	US Small Cap Value	Long Term Treasury	Gold	TIPS	Short Term Treasury	Intermediate Term Treasury
2004	1.55%	5.73%	$10,573	5.08%	$10,508	5.16%	$10,516	5.63%	15.32%	1.79%	2.81%	3.12%	-0.17%	0.26%
2005	3.42%	7.57%	$11,374	7.45%	$11,290	7.55%	$11,310	5.09%	6.07%	6.61%	17.76%	2.59%	1.77%	2.31%
2006	3.10%	6.54%	$12,117	6.78%	$12,055	6.68%	$12,065	2.99%	9.88%	1.24%	15.30%	1.79%	2.93%	2.42%
Annual return for 2004 is from 04/01/2004 to 12/31/2004 and annual return for 2006 is from 01/01/2006 to 09/30/2006

Risk and Return Metrics

Portfolio return and risk metrics
Metric	GBFly with TIPS	GBFly with ST Treasuries (original)	GBFly with IT Treasuries
Arithmetic Mean (monthly)	0.66%	0.64%	0.64%
Arithmetic Mean (annualized)	8.20%	7.96%	8.00%
Geometric Mean (monthly)	0.64%	0.62%	0.63%
Geometric Mean (annualized)	7.98%	7.76%	7.80%
Standard Deviation (monthly)	1.84%	1.76%	1.80%
Standard Deviation (annualized)	6.38%	6.10%	6.22%
Downside Deviation (monthly)	1.14%	1.04%	1.10%
Maximum Drawdown	-5.11%	-4.41%	-4.82%
Stock Market Correlation	0.77	0.80	0.78
Beta^(*)	0.61	0.61	0.60
Alpha (annualized)	2.20%	1.97%	2.06%
R²	59.04%	64.48%	60.95%
Sharpe Ratio	0.76	0.76	0.75
Sortino Ratio	1.13	1.17	1.13
Treynor Ratio (%)	7.98	7.61	7.74
Active Return	-1.50%	-1.73%	-1.69%
Tracking Error	5.18%	4.83%	5.05%
Information Ratio	-0.29	-0.36	-0.33
Skewness	-1.01	-0.71	-0.91
Excess Kurtosis	2.02	1.07	1.63
Historical Value-at-Risk (5%)	1.73%	1.80%	1.75%
Analytical Value-at-Risk (5%)	2.37%	2.26%	2.31%
Conditional Value-at-Risk (5%)	3.46%	3.13%	3.34%
Upside Capture Ratio (%)	73.63	72.05	72.17
Downside Capture Ratio (%)	63.57	63.13	63.01
Safe Withdrawal Rate	53.09%	52.73%	52.79%
Perpetual Withdrawal Rate	5.47%	5.23%	5.27%
Positive Periods	20 out of 30 (66.67%)	20 out of 30 (66.67%)	21 out of 30 (70.00%)
Gain/Loss Ratio	1.20	1.21	1.03
^* US stock market is used as the benchmark for calculations. Value-at-risk metrics are monthly values.

Drawdowns

Historical Market Stress Periods

Drawdowns for GBFly with TIPS

Drawdowns for GBFly with TIPS
Rank	Start	End	Length	Recovery By	Recovery Time	Underwater Period	Drawdown
1	Apr 2004	Apr 2004	1 month	Oct 2004	6 months	7 months	-5.11%
2	May 2006	Jun 2006	2 months				-2.63%
3	Jan 2005	Apr 2005	4 months	May 2005	1 month	5 months	-1.89%
4	Oct 2005	Oct 2005	1 month	Nov 2005	1 month	2 months	-1.54%
5	Feb 2006	Feb 2006	1 month	Mar 2006	1 month	2 months	-0.23%

Drawdowns for GBFly with ST Treasuries (original)

Drawdowns for GBFly with ST Treasuries (original)
Rank	Start	End	Length	Recovery By	Recovery Time	Underwater Period	Drawdown
1	Apr 2004	Apr 2004	1 month	Oct 2004	6 months	7 months	-4.41%
2	May 2006	Jun 2006	2 months				-2.68%
3	Jan 2005	Apr 2005	4 months	Jun 2005	2 months	6 months	-2.13%
4	Oct 2005	Oct 2005	1 month	Nov 2005	1 month	2 months	-1.32%
5	Feb 2006	Feb 2006	1 month	Mar 2006	1 month	2 months	-0.20%

Drawdowns for GBFly with IT Treasuries

Drawdowns for GBFly with IT Treasuries
Rank	Start	End	Length	Recovery By	Recovery Time	Underwater Period	Drawdown
1	Apr 2004	Apr 2004	1 month	Oct 2004	6 months	7 months	-4.82%
2	May 2006	Jun 2006	2 months				-2.72%
3	Jan 2005	Apr 2005	4 months	Jun 2005	2 months	6 months	-2.04%
4	Oct 2005	Oct 2005	1 month	Nov 2005	1 month	2 months	-1.45%
5	Feb 2006	Feb 2006	1 month	Mar 2006	1 month	2 months	-0.18%

Portfolio Assets

Performance statistics for portfolio components
Name	CAGR	Stdev	Best Year	Worst Year	Max Drawdown	Sharpe Ratio	Sortino Ratio	Market Correlation
US Large Cap Growth	5.50%	8.91%	5.63%	2.99%	-6.13%	0.30	0.46	0.96
US Small Cap Value	12.56%	12.16%	15.32%	6.07%	-7.07%	0.78	1.38	0.92
Long Term Treasury	3.83%	7.76%	6.61%	1.24%	-7.00%	0.13	0.17	-0.10
Gold	14.27%	15.86%	17.76%	2.81%	-8.64%	0.73	1.34	0.31
TIPS	3.01%	5.04%	3.12%	1.79%	-4.69%	0.00	0.01	0.01
Short Term Treasury	1.80%	1.56%	2.93%	-0.17%	-1.36%	-0.87	-0.99	-0.03
Intermediate Term Treasury	1.99%	4.08%	2.42%	0.26%	-3.74%	-0.25	-0.32	-0.07

Portfolio Asset Performance

Performance of portfolio assets
Name	Total Return
Name	3 Month	Year To Date	1 year
US Large Cap Growth	3.79%	2.99%	6.08%
US Small Cap Value	1.72%	9.88%	10.15%
Long Term Treasury	6.28%	1.24%	2.38%
Gold	-2.87%	15.30%	27.34%
TIPS	3.52%	1.79%	1.77%
Short Term Treasury	2.08%	2.93%	3.65%
Intermediate Term Treasury	3.96%	2.42%	3.13%
Trailing returns as of last calendar month ending September 2006

Monthly Correlations

Correlations for the portfolio assets
Name	US Large Cap Growth	US Small Cap Value	Long Term Treasury	Gold	TIPS	Short Term Treasury	Intermediate Term Treasury	GBFly with TIPS	GBFly with ST Treasuries (original)	GBFly with IT Treasuries
US Large Cap Growth	1.00	0.83	-0.12	0.13	-0.06	-0.08	-0.11	0.63	0.67	0.65
US Small Cap Value	0.83	1.00	-0.07	0.38	0.04	-0.05	-0.05	0.81	0.84	0.82
Long Term Treasury	-0.12	-0.07	1.00	-0.12	0.84	0.84	0.96	0.23	0.14	0.22
Gold	0.13	0.38	-0.12	1.00	0.20	0.14	0.01	0.72	0.73	0.71
TIPS	-0.06	0.04	0.84	0.20	1.00	0.81	0.87	0.44	0.34	0.40
Short Term Treasury	-0.08	-0.05	0.84	0.14	0.81	1.00	0.94	0.35	0.28	0.35
Intermediate Term Treasury	-0.11	-0.05	0.96	0.01	0.87	0.94	1.00	0.31	0.23	0.30

Portfolio Return Decomposition

Portfolio return decomposition
Name	GBFly with TIPS	GBFly with ST Treasuries (original)	GBFly with IT Treasuries
US Large Cap Growth	$286	$286	$286
US Small Cap Value	$688	$688	$688
Long Term Treasury	$197	$197	$197
Gold	$792	$792	$792
TIPS	$154
Short Term Treasury		$91.46
Intermediate Term Treasury			$101
Return attribution decomposes portfolio gains into its constituent parts and identifies the contribution to returns by each of the assets.

Portfolio Risk Decomposition

Portfolio risk decomposition
Name	GBFly with TIPS	GBFly with ST Treasuries (original)	GBFly with IT Treasuries
US Large Cap Growth	18.22%	20.34%	19.20%
US Small Cap Value	31.85%	34.85%	33.26%
Long Term Treasury	5.73%	3.82%	5.74%
Gold	37.04%	39.48%	37.67%
TIPS	7.17%
Short Term Treasury		1.51%
Intermediate Term Treasury			4.13%
Risk attribution decomposes portfolio risk into its constituent parts and identifies the contribution to overall volatility by each of the assets.

Annual Asset Returns

GBFly with TIPS Allocation Drift

Annual allocation drift for gbfly with tips
Year	US Large Cap Growth Allocation	US Small Cap Value Allocation	Long Term Treasury Allocation	Gold Allocation	TIPS Allocation
2004	20.00%	20.00%	20.00%	20.00%	20.00%
2005	19.98%	21.81%	19.25%	19.45%	19.51%
2006	19.52%	21.51%	19.08%	21.29%	18.60%

GBFly with ST Treasuries (original) Allocation Drift

Annual allocation drift for gbfly with st treasuries (original)
Year	US Large Cap Growth Allocation	US Small Cap Value Allocation	Long Term Treasury Allocation	Gold Allocation	Short Term Treasury Allocation
2004	20.00%	20.00%	20.00%	20.00%	20.00%
2005	20.11%	21.95%	19.37%	19.57%	19.00%
2006	19.66%	21.67%	19.22%	21.45%	18.00%

GBFly with IT Treasuries Allocation Drift

Annual allocation drift for gbfly with it treasuries
Year	US Large Cap Growth Allocation	US Small Cap Value Allocation	Long Term Treasury Allocation	Gold Allocation	Intermediate Term Treasury Allocation
2004	20.00%	20.00%	20.00%	20.00%	20.00%
2005	20.09%	21.93%	19.36%	19.55%	19.07%
2006	19.63%	21.63%	19.19%	21.41%	18.14%