Optimized Portfolios

OPTIMIZED PORTFOLIOS OVERVIEW:

The purpose of our Optimized Portfolios is to create the best combinations of TAA strategies into a single investment portfolio which act as hybrid strategies. In doing this, we are able to create portfolios that rank favorably across all our performance metrics (see our Comparison Matrix), resulting in better overall investment strategies. The reason for this, is because we combine uncorrelated individual TAA strategies together; therefore, when one strategy zigs, the other one zags, resulting in much smoother performance. The end result is that our Optimized Portfolios strike a good balanced between high returns and low volatility; an ideal setup for most investors. That being said, each investor has different needs and expectations, therefore we have create four (4) Optimized Portfolios to suit your needs; whatever those might be.

Broadly speaking our four (4) Optimized Portfolios can be broken down into one (1) of two (2) categories: Tax Efficient (TE) and Tax Inefficient (TI). In the TE category at least 75% of the returns have historically been classified as long term capital gains, according to the Canadian and American tax rules. In the TI category at most 40% of the returns have historically been classified as long term capital gains. Therefore, our TI Optimized Portfolios are best suited for tax sheltered accounts such as the Canadian TFSA/RSP and the American Roth IRAs/401k/403b etc. Conversely, our TE Optimized Portfolios, are better suited for regular investing/savings accounts that do not have any tax sheltering. 

Why select TI Optimized Portfolios? Because they have historically returned 20% to 30% more than their TE counterparts over a 20+ year period. However, this advantaged would only be realized in a tax sheltered account.

Within both TE and TI categories we offer two (2) separate Optimized Portfolios: Aggressive and Balanced. The aim of the Aggressive Optimized Portfolios is to maximize the return, with all other metrics (i.e. volatility, drawdown, Sharpe ratio) being secondary. The aim of the Balanced Optimized Portfolios is to strike a balanced between return, volatility and drawdown; hence, the primary aim of the balanced Optimized Portfolios is to maximize the Sharpe ratio (a measure of reward/risk). However, in all cases our primary aim was to beat the metrics of the S&P500 over the long run. Our secondary aim was to beat the majority of performance metrics of individual TAA strategies over the long run. You can view our Comparison Matrix below and judge for yourself if those aims were achieved.

Note: for the data nerds amongst our viewers, we endeavoured to reduced the risk of data snooping/curve fitting our Optimized Portfolios by running 1 year and 5 year rolling backtest between 1995 and today to confirm that the superior performance of our Optimized Portfolios was consistent across all historical timeframes for which we had reliable data. What we found was that we did indeed have better returns and lower volatility across the majority of timeframes  (>60% of the time) as compared to the S&P500. Additionally, we experienced a lower standard deviation for both these metrics, across the aggregate of all timeframes; meaning the 1 year and 5 year rolling returns/rolling volatility were more consistent in our Optimized Portfolios than those of the S&P500, and thus more dependable. Finally, we have reviewed the in sample data between 2022 and 2023 and found that the advantage of our Optimized Portfolios was/is still present. With that said, it is impossible to know what the future brings, all we can do is look to the past for some guidance, use a little bit of thinking and hedge our bets for the future by using a diversified approach to investing; which is what we aimed to achieve when creating our Optimized Portfolios. 

COMPARISON MATRIX:

Quickly compare the performance of all strategies, by navigating to our comparison matrix using the link below:

OPTIMIZED PORTFOLIOS: