Lazy Portfolios 3 – One Fund from Vanguard

Lazy Portfolios 3

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11 Responses

  1. Avatar Al Cam says:

    Interesting comparison and results.

    FYI, Trustnet breakdowns show the following approximate [Vanguard LS] allocation to UK Equities:
    LS80 20%
    LS60 15%; &
    LS40 10%

    I went through a detailed breakdown of LS80 a few years back, and at that time my results showed about 25% allocated to UK equities.

  2. Avatar Paul says:

    Good piece. I agree my research showed a home is for life strategy too.
    I would value a piece in explaining the maths for those these less mathematically inclined. I’m fascinated by this don’t understand how to follow the number crunching to truly understand what’s being illustrated.

    • Mike Rawson Mike Rawson says:

      To be honest, it’s not real maths. I’m just trying to turn several alternate measures of “distance” from an “ideal” neutral asset allocation into a single number – so that we can more easily compare the various portfolios.

      I find it a bit of a pain monitoring and rebalancing 35 asset classes in my portfolio, and I wanted to be sure that I couldn’t achieve the same objective with far fewer funds.

  3. Avatar Paul Knight says:

    Thanks Mike – do you mind sharing the formula for the Std Dev that you use on the tables please – as an example looking at the 7C 14 one from the ETF deck as a baseline. However when I do SD I get 0.6% and not 0.9% so in trying to adapt and apply just wanted to check my understanding thanks

    • Mike Rawson Mike Rawson says:

      You’re jumping ahead a bit – we won’t get to the 7C-14 portfolio for another four articles.

      I also wouldn’t get too hung up on the absolute numbers – it’s the relative numbers between portfolios that counts. As it says in the article, the geometric mean is just a speedometer to show how far a portfolio has drifted from a benchmark allocation. It has no statistical significance.

      The 7C-14 “SD” is the SD of the variances across the 17 asset classes of the 7C-14 allocations compared to the Max Return benchmark allocations. It’s not the SD of the allocations themselves – I only care about the distance from the benchmark.

      The formula is simple: stdev(range of variances) in Google Sheets.

      • Avatar Al Cam says:

        ahhhh, do I spy some bistromaths?

        • Mike Rawson Mike Rawson says:

          It’s not far off, but not quite.

          I’m sure there must be an approved method of measuring the average distance of each of many sets of variances from a common reference point, but I don’t imagine that using it would make things any more clear to the average private investor.

          • Avatar Al Cam says:

            Would some type of regression analysis help?

            P.S. for anyone unfamiliar with bistromathics, see e.g. https://hitchhikers.fandom.com/wiki/Bistromathics

          • Mike Rawson Mike Rawson says:

            I’m not sure what you think needs help. I just need a single number to quantify the distance of each portfolio from my target.

            The geometric mean of the two calculations I’m using works fine for me. It’s what I use to decide when my real portfolio needs rebalancing, so this has the advantage of me knowing exactly how horrified I would be to use one of these Lazy Portfolios.

            Everyone is free to come up with their own measure, but I find that the simplest ones are best, as you actually calculate them and use them every day.

            Or to put it another way: “All models are wrong, but some are useful.”

          • Avatar Al Cam says:

            I’m not sure that anything needs help, per se.
            I was just making a suggestion to your “I’m sure there must be…..”
            Working with formulas/approaches [and, of course the numbers that they generate] that you are personally familiar with has many advantages.
            Most metrics (e.g. Pugh matrices) are constructed largely for convenience and as long as you understand their limitations then that is just fine.
            After all, to slightly re-phrase Doctor Box’s saying all models are just approximations – but some are better approximations than others.

  4. Avatar Paul nkight says:

    Thanks. Apologies for jumping ahead. Had looked at the ETF deck.
    I’ll try again in google sheets. I think I’m using the same way of looking / using the numbers as you are suggesting and plugged in your numbers to sense check.

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Lazy Portfolios 3 – One Fund from Vanguard

by Mike Rawson time to read: 4 min
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