Portfolio Explorer: Optimization Message Board

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Strategies & Market Trends : Portfolio Explorer: Optimization

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To: portfolioexplorer who wrote ()	12/6/1999 9:58:00 AM
From: portfolioexplorer	Read Replies (1) of 3

There's no way to talk about the Motley Fool portfolio without first congratulating them: this portfolio screamed. Further, they did it fairly - telling people their plans in advance, limiting their gains from people copying them. Between 8/5/94 and 12/3/99, they made 68.73% per year vs. 25.43% for the S&P (my numbers are slightly different from theirs because I've added dividends). There's no question that they did fantastically well, but they could have done better with the same picks. The portfolio took a pretty decent amount of risk. On any day, they had a VaR (Value at Risk, 1-in-20 chance of losing a certain amount) of 3.96%. If they had diversified by including 59% S&P index fund, they would have dropped their risk a ton. Then, by using 43% margin, they would have returned back to the same VaR=3.96%. End result? 76.7% per year.

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