Fund & Security Common History Analysis
When assessing investments, many advisors are unable to conveniently review the common history of a larger portfolio. The default is to look at individual Annual ROR and associated risk statistics even though the periods under consideration may be wildly different. The next level is to look at fixed (3, 5 or 10) year statistics. Even here, the common history may be longer or just slightly short of these arbitrary periods; say 7 years or 6 1/2 years or 9 years and may not cover an important event that significantly effected the return profiles.
It’s useful to have the capability to examine return profiles of any and all common periods, such as the common period around the March 2020 Covid collapse, or the 2008-2009 housing collapse in the US for example.
Note: Sandbox looks at any common period … any start and any end date chosen by the user and generates charts, data, performance statistics and correlations for that period. It can drill down to any period of interest. Correlations are not constant BTW.
Pick the period, get a different result
We all realize returns vary over time, but it is interesting to look at a stock or an index and see how statistics such as annual rate of return and volatility change as one examines longer and longer periods. Compounding of big winners has a larger $ impact on portfolios than one might expect. This also applies to cap weighted indices such as the S&P 500.
If a fund has a 3 year history and another has a 4 year history it is quite possible that the fund with the longer history has embodied an experience that fundamentally effects the result, but misses the other. You need those tools that will point this out.
This (below) is easy to prepare and readily available as a Slider Chart:
| Period | S&P 500 ARR | S&P 500 Vol |
| Most recent 2 years | 24% | 12% |
| Most recent 3 years | 13% | 17% |
| Most recent 4 years | 13% | 16% |
| Most recent 5 years | 17% | 18% |
| Most recent 20 years | 10% | 15% |
| Most recent 30 years | 11% | 15% |
It’s been our experience that the fund with the longest history often suffers in a comparison to the one with the shorter history. This is why COMMON history analysis is important.
Blending the S&P 500 with S&P/TSX Composite
The chart above illustrates the importance of a small increase in ARR over time. The 50/50 blended return has a 1% lower ARR than the S&P 500, but the $ difference in portfolio values over time is very large. Note that the TSX ARR is approximately 2% lower than the S&P 500 over that same period, and the final $ return of the S&P 500 is double that of the TSX. It wasn’t always this way.
More Blended Trivia for those interested
A portfolio that included the S&P and the TSX in a 50-50 weighting showed an annual return of 8.62% if we began in January 2007. If we began investing in the blend beginning in 2010, the annual return would be 11.29%. If we began investing in the blend beginning in 2016 the ARR is 12.3%. Altering the start date by a month or 2 can produce false knowledge. We shouldn’t be sold on a cherry-picked period.
Sandbox: lots of data, highly interactive, accessible anywhere.
info@sigmasandbox.com or call us at 416-879-6204