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Lazy Portfolio - Poor Performance
Dr Quant
posted Mar 27, 2015

Just playing around with Quantopian here and thought I would learn by cloning an algorithm and implementing one of the Lazy Portfolio's from Bogleheads. I chose the three fund portfolio consisting of 33% BND, 34% VTI, and 33% VXUS.

Did I do this right? The return is less than half of the SPY, alpha is negative, and my Sharpe ratio is 0.52.

Is this poor performance a reflection of the lazy portfolio construction or of my implementation? I would have expected a higher Sharpe ratio, considering the SPY is something like 1.5. I feel like I am fundamentally misunderstanding something here.

3 responses
Charlie Hacker
Mar 27, 2015

Graphing those stocks over the same time period within yahoo finance appears to indicate that only 1 of the 3 stocks (VTI) had similar gains to SPY. The other two stocks looked flat and weighed down the returns. Btw, probably don't need to rebalance daily as the fees might start to add up.

Dan Dunn
Mar 27, 2015

The algo actually only rebalances once. I think you probably shouldn't have used context.portfolio.capital_used in this way - once you've made a single trade, you'll never make another, because capital_used becomes nonzero.

I changed your algo to rebalance every month. And I added the record() function so you can see the values over time. Still not an amazing return ;)

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

Dan Dunn
Mar 27, 2015

Yuck, just noticed an error in my record() function. This one graphs the right thing - no performance difference.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.