Tuesday, November 3, 2015

4 Portfolio Recipes That Consistently Beat The 'Lazy Portfolios'

We recently received a question about the performance of the 8 "Lazy Portfolios" tracked by investment columnist Paul B. Farrell. The term "Lazy Portfolio" refers to a fixed asset allocation that is periodically rebalanced. We like to call this a "strategic portfolio recipe," but a fixed asset allocation like this can also go by several other names, such as buy-and-hold portfolio, static portfolio, or passive allocation. A strategic portfolio with a fixed allocation can be contrasted with a tactical/dynamic portfolio that changes its allocation over time.
Each of the Lazy Portfolios has a backstory or underlying theme, such as modeling the Yale endowment's asset allocation or copying Ted Aronson's family portfolio. This article will focus on the overall performance of the 8 portfolios, not their origin stories.
Since VizMetrics already tracks over 250 portfolio recipes, we decided to add these 8 Lazy Portfolio recipes to the list of portfolios that we analyze monthly. We were eager to see how these compared to our entire set of strategic and tactical portfolio recipes.

The Analysis Process

We followed four steps to analyze the risk and return of the Lazy Portfolios and then search for portfolios that outperform the 8 Lazy Portfolios.
  1. Create the Lazy Portfolios. We used the exact Vanguard mutual funds and allocations specified for each Lazy Portfolio, and then we backtested their performance using monthly total returns and monthly rebalancing. Our data covered the 10 years ending September 30, 2015.
  2. Run the analysis. Then we compared risk and return over the past 1 year and over the past 10 years. We like using the 1-year period since we've seen some market turbulence recently, and we like looking at the last 10 years since that period includes the downturn of 2008-2009. If you look at risk vs. return for only a short, upward period, then you can overlook the true risk of the portfolio since the evaluation period doesn't include much downside variation.
  3. Create scatterplots. We plotted risk vs. return for the Lazy Portfolios and all the other portfolios that we track.
  4. Filter the results. We found portfolios that beat the Lazy Portfolios, based on both risk and return.
  5. Identify the winners. We identified 4 portfolios that beat every Lazy Portfolio over both the 1-year and 10-year periods. The winners included two mutual funds, and two tactical portfolio recipes.
Step 1: Create the Lazy Portfolios
We created the Lazy Portfolios using Vanguard mutual funds, matching Farrell's allocations. ETFs could be used instead of mutual funds, but we wanted to remain true to the original portfolio recipes.
The Lazy Portfolios are constructed as follows:
Lazy Portfolio NameLazy Portfolio Recipe (ingredients and percentages)
Lazy Portfolio: Aronson Family TaxableVEURX=5%, VIPSX=15%, VPACX=15%, VWEHX=5%, VISGX=5%,
VISVX=5%, VTSMX=5%, VEIEX=10%, VEXMX=10%, VUSTX=10%,
Lazy Portfolio: Fundadvice Ultimate Buy & HoldVFINX=6%, VFISX=12%, VFITX=20%, VEIEX=6%, VGSIX=6%, NAESX=6%,VISVX=6%, VIVAX=6%, VIPSX=8%, VTMGX=12%, VTRIX=12%
Lazy Portfolio: CoffeehouseVFINX=10%, VGSIX=10%, NAESX=10%, VISVX=10%, VIVAX=10%,VGTSX=10%, VBMFX=40%
Lazy Portfolio: MargaritavilleVIPSX=33%, VGTSX=33%, VTSMX=34%
Lazy Portfolio: Dr. Bernstein's No BrainerVFINX=25%, VEURX=25%, NAESX=25%, VBMFX=25%
Lazy Portfolio: Second Grader's StarterVBMFX=10%, VGTSX=30%, VTSMX=60%
Lazy Portfolio: Dr. Bernstein's Smart MoneyVEIEX=5%, VEURX=5%, VPACX=5%, VGSIX=5%, NAESX=5%, VISVX=10%, VIVAX=10%, VTSMX=15%, VFSTX=40%
Lazy Portfolio: Yale U's UnconventionalVEIEX=5%, VTMGX=15%, VIPSX=15%, VUSTX=15%, VGSIX=20%, VTSMX=30%
Step 2: Run the analysis
Next we calculated the risk and return metrics for each of the 8 Lazy Portfolios. For the risk measure, we used Maximum Drawdown, which is the maximum percentage that each portfolio lost in value during the period, as measured at the end of each month. We like Maximum Drawdown for measuring risk since it captures quantitatively the "ouch!" that we feel when our portfolio hits the bottom. For the return measure, we used total annual return, which assumes that distributions are reinvested during the period.
The Lazy Portfolios showed the following risk and return characteristics, for the period ending September 30, 2015:
Lazy Portfolio Name1-year
annual return
maximum drawdown
annual return
10-year maximum drawdown
Lazy Portfolio: Aronson Family Taxable-2.8-9.25.9-41.1
Lazy Portfolio: Fundadvice Ultimate Buy & Hold-2.4-7.25.3-35.7
Lazy Portfolio: Coffeehouse0.7-5.66.1-36.0
Lazy Portfolio: Margaritaville-4.0-8.55.0-40.5
Lazy Portfolio: Dr. Bernstein's No Brainer-1.6-7.86.0-43.3
Lazy Portfolio: Second Grader's Starter-3.4-9.65.7-49.2
Lazy Portfolio: Dr. Bernstein's Smart Money-1.0-6.35.5-37.6
Lazy Portfolio: Yale U's Unconventional0.9-7.06.5-42.2
Benchmark: The SPDR S&P 500 Trust ETF (SPY)-0.8-8.56.7-50.8
Note that all the Lazy Portfolios had a maximum drawdown exceeding -35% over the past 10 years, with most worse than -40%. By comparison, the SPDR S&P 500 Trust ETF had a maximum drawdown of -50.8% with a 10-year return of 6.7%.
Step 3: Create the scatterplots
Now let's separate the wheat from the chaff using a risk vs. return scatterplot. We plotted the performance of all the Lazy Portfolios along with all the other portfolio recipes in one view. This allows us to visualize two important metrics (risk and return) at the same time.
With risk and return shown on the scatterplots below, the best portfolios (with the highest return and lowest risk) appear at the top left. In the plots below, the orange diamonds are the Lazy Portfolios. The blue squares are the portfolio recipes that showed both higher return and lower risk compared to the Lazy Portfolios. The yellow triangles are the additional portfolio recipes tracked by VizMetrics. For a benchmark comparison, we've also added SPY, shown as the purple circle.
Lazy Portfolios compared to Asset Allocation portfolios and SPY
The 10-year scatterplot covers the period October 2004 to September 2015. The 1-year scatterplot covers the period October 2014 to September 2015.

Step 4: Filter the results

You can see that several blue squares are "northwest" (above and to the left) of all the orange Lazy Portfolios. Each blue square represents a portfolio with higher return and lower risk than every one of the Lazy Portfolios. In the 1-year scatterplot, there are 36 blue squares that beat all the Lazy Portfolios. In the 10-year scatterplot, there are 38 blue squares that beat all the Lazy Portfolios.
Over the past 10 years, the broad U.S. equity market (represented by an exchange-traded fund, SPY) has generated a higher return than each of the Lazy Portfolios. But this higher return is accompanied by higher volatility. The Lazy Portfolios each have some fixed income exposure and this offers a lower-risk alternative to SPY that some investors may prefer.
If we consider both the 1-year and 10-year time period, we find that the following four portfolios beat every Lazy Portfolio based on risk and return:
The Four Winners
(that outperform all of the Lazy Portfolios)
annual return
maximum drawdown
annual return
10-year maximum drawdown
Vanguard Wellesley (VWINX)0.9-3.26.8-18.8
Vanguard Balanced (VBIAX)1.0-5.26.6-32.5
Minimum Conditional Value-at-Risk Portfolio (t.cvar)4.1-4.010.0-11.0
Minimum Drawdown Portfolio (t.loss)8.0-4.69.8-13.4
Benchmark: S&P 500 ETF-0.8-8.56.7-50.8
Another portfolio, the "Strategic 60-40 Portfolio" (s.6040) nearly beats all of the Lazy Portfolios, too. This portfolio beats 7 of the 8 Lazy Portfolios (all except "Yale U's Unconventional") over the 1-year and 10 year periods. The Strategic 60-40 Portfolio returned 6.4% over 10 years, and "Yale U's Unconventional" returned 6.5%.


The 8 Lazy Portfolios do provide some diversification and have shown middle-of-the-pack performance. But there are better choices for investors.
If you want a lazy, easy-to-maintain portfolio then either of the Vanguard funds, VWINX or VBIAX, are a better choice. These funds are even lazier than the 8 Lazy Portfolios, since you don't have to buy and rebalance the ingredients yourself. Importantly, these Vanguard funds also provide better performance with lower risk. That's a true "no brainer."
Or if you seek higher returns, and if you're willing to rebalance monthly, you can look at tactical portfolio recipes, such as t.cvar and t.loss.
To view the full set of risk and return scatterplots for over 250 portfolio recipes, sign up for a free trial of the VizMetrics Investor subscription. This also includes risk and return analytics for the 1-, 3-, 5-, 7-, and 10-year periods.

Wednesday, July 24, 2013

Top Performing Portfolios Using Just 3 ETFs

The recent Wall Street Journal article "A Portfolio That's as Simple as One, Two, Three" got us thinking about the possibilities of using just three ETFs to build a portfolio. But the article was sparse on examples. It provided only two specific portfolio allocation ideas: 1) 40% U.S. stocks, 20% international stocks, 40% total bond market and 2) an allocation using an all-country equity fund (e.g., ACWI) plus a U.S. bond fund and an international bond fund.
That left us hungry for more actionable asset allocation ideas using three ETFs. We also wanted to explore portfolio allocations using other types of assets. This article explains how we looked at a full range of portfolios using just three ETFs, and which portfolios performed best.
Our approach to finding the best portfolios using just three ETFs
1. Choose a list of global asset classes from which to pick the three ETFs.
2. Create portfolios by choosing every unique combination of three ETFs from the asset class list.
3. Apply an allocation (% weighting) to each ETF within each portfolio.
4. Calculate risk and return metrics for each portfolio.
5. Identify winners and losers based on risk and return.
Choosing the asset classes
We chose eight asset classes and applied a data set with 40 years of history through 2012. Since the ETFs listed below are not 40 years old, we've used an appropriate mutual fund or proxy to complete each data series.
  • Gold (GLD)
  • Real estate (VNQ or ICF or VGSIX)
  • Long Term Treasury bonds (VGLT or TLT or VUSTX)
  • Short Term Treasuries (VGSH or SHY or VFISX)
  • U.S. aggregate bonds (BND or AGG or VBMFX)
  • U.S. equity: (VTI or IVV or VTSMX)
  • Commodities: (DJP or DBC or PCRIX)
  • International equity (VXUS or VEU or VGTSX)

Are there asset classes we've missed? Sure, but these eight should give us some idea of where to look first. If you can't imagine yourself owning some of the above asset classes, then we hope there will still be some portfolio combinations worth considering.
Creating the Portfolios
Using a bit of combinatorial math, there are 56 possible combinations if we pick three asset classes at a time from a set of eight. To see the full list of 56 portfolios, visit Portfolios Using Just 3 ETFs: List of 56 Portfolios based on Global Asset Classes.
Applying the Allocations
We've applied an equal weight of one-third (33.33%) to each item in each portfolio. This equal weighting is a simplification; there are many other allocation possibilities (e.g., 60%/20%/20%, 20%/20%/60%) but this allows us to explore a manageable number of portfolios and should give us an idea of what looks most promising.
Then we calculated the risk and return for each portfolio using annual data and the assumption of annual rebalancing and no transaction costs or taxes.
The results
Which three-fund portfolios had lower risk and higher return? Here's what we found. The top left of the chart contains the portfolios with the lowest risk and highest return.

Some highlights:
  • Portfolio #30 (Real Estate, Short Term Treasuries, International Equities) has an annual return of 10.99% with a standard deviation of 9.82%

  • Portfolio #11, the highest return portfolio, would have increased 82-fold (8,200%) over the 40-year period.

We're aware of the particular behavior of the gold market in the early 1970's. Portfolios #1 through #21 contain gold, and Portfolios #22 through #56 have no gold.
Looking at the poorer performing portfolios,
  • Portfolio #40 offers significantly higher risk without much extra return.
  • Portfolio #19 offers significantly lower return compared to other portfolios with similar risk (e.g., Portfolios #9, #39).
  • The lowest return (and lowest risk) portfolio, #42, would have increased 21-fold (2,100%) over the 40-year period.

To see detailed descriptions of all 56 portfolios with the Risk vs. Return scatterplot, visit Portfolios Using Just 3 ETFs: Risk vs. Return Scatterplot.
Several portfolios, such as #30, have offered solid returns of 11% per year at below-market risk.
Looking at volatility, all 56 of the 3-ETF portfolios in this analysis were less volatile than holding the single asset class of U.S. equities, which has a standard deviation of 18.1% (!) over the 40-year period.
Looking at total annual returns, most of the portfolios in this analysis had a higher return than the U.S. equities asset class, which had an annual return of 9.5%.
The top-performing portfolios are worth further analysis to see if additional optimizations can be made with asset selection, factor tilts, or other variations.

Friday, July 12, 2013

The Permanent Portfolio During Rising Interest Rates: Here's What Happens

Our recent article "3 Portfolios Inspired By Graham, Swensen, Browne" showed Harry Browne's Permanent Portfolio to be a solid performer, returning 6.6% over the past five years with less risk than an S&P 500 portfolio or a balanced portfolio (60% stocks / 40% bonds). But some unanswered questions emerged from that analysis.
The New Questions
  1. Over a longer time horizon, how has the Permanent Portfolio performed?
  2. During a period of rising interest rates, how has the Permanent Portfolio performed?
We intend to answer these questions in this article.
As a recap, the Permanent Portfolio can be constructed as follows:
  • 25% Gold (using GLD)
  • 25% Long-Term Treasuries (using VGLT or TLT or VUSTX)
  • 25% Stocks (using SPY or VTI or VFINX)
  • 25% Cash or Short-Term Treasuries (using SHV or VUSXX)
The Permanent Portfolio's design is intended to weather varied market conditions and provide a reasonable risk-adjusted return. Our model of the Permanent Portfolio rebalances yearly and we've used annual mutual fund returns as proxies for each portfolio component, plus historical indexes to complete the data series.
Looking at 39 years of history
Due to structural changes in the gold market from late 1971 through 1973, and due to the importance of gold in the Permanent Portfolio, we start our long-term analysis in 1974. So we are looking at the 39 years beginning with 1974 and ending with 2012.
Let's first compare the Permanent Portfolio to two benchmark portfolios for the 39-year period.
Return and Risk: 1974-2012
  • Permanent Portfolio: Total return is 8.9%, Risk (as measured by standard deviation) is 7.7%
  • S&P 500 Portfolio: Total return is 10.2%, Standard deviation is 17.8%
  • 60/40 Balanced Portfolio: Total return is 9.9%, Standard deviation is 11.6%
Looking at a period of rising interest rates
Now let's focus on the period 1977-1981 when interest rates were rising. The Fed began raising the Fed Funds rate in February 1977, and this continued through 1981 under Paul Volcker. Since current rates have nowhere to go but up, we also wanted to look at this time span as a comparison.
Return and Risk: 1977-1981
  • Permanent Portfolio: Total return is 11.9%, Standard deviation is 14.5%.
  • S&P 500 Portfolio: Total return is 7.6%, Standard deviation is 16.1%.
  • 60/40 Balanced Portfolio: Total return is 8.6%, Standard deviation is 10.1%
Risk vs. Return Scatterplot
Below is a view of the three portfolios during both time spans. Looking at the two Permanent Portfolio data points, we see that its performance during the difficult 1977-1981 period exceeded its overall performance during the 39-year period. The two benchmark portfolios had a rougher time during the period of rising interest rates.

1. Over a longer time horizon, how has the Permanent Portfolio performed?
Over the 39-year period, the Permanent Portfolio has lagged the benchmark portfolios in total return, but the Permanent Portfolio has exhibited less risk.
2. During a period of rising interest rates, how has the Permanent Portfolio performed?
Over the rising interest rate period, the Permanent Portfolio outperformed the S&P 500 with less risk.

Wednesday, July 10, 2013

8 Balanced Portfolios Compared: Vanguard, Janus, And Others

Our recent article "3 Portfolios Inspired By Graham, Swensen, Browne" elicited the suggestion that we compare a do-it-yourself ETF portfolio of 60% stocks and 40% bonds to Vanguard's Balanced Fund (VBIAX). That also made us think about the other balanced funds from the leading fund companies.
Specifically, here are the two questions we want to answer:
  1. Which "balanced fund" has the best risk-adjusted returns?
  2. Can I do better creating my own balanced ETF portfolio using 60% stocks (VTI) and 40% bonds (BND)?
Choosing the Portfolios
First, we identified balanced funds from the major fund companies. Here's the list with each ticker and annual expense according to the prospectus.
  • Dodge & Cox Balanced (DODBX) 0.53%
  • Fidelity Balanced (FBALX) 0.60%
  • Fidelity Global Balanced (FGBLX) 1.04%
  • Ibbotson Balanced (BETFX) 0.92%
  • Janus Balanced (JANBX) 0.72%
  • Schwab Balanced (SWOBX) 0.65%
  • Vanguard Balanced (VBIAX) 0.10%
  • Wells Fargo Advantage Index Asset Allocation (WFAIX) 0.91%
We also created a benchmark portfolio of 60% VTI and 40% BND.
This static 60-40 portfolio has a 0.07% blended annual expense based on VTI expenses of 0.05% and BND expenses of 0.10%.
Looking at the numbers
In the table below, we see that Ibbotson has lagged the group, Dodge & Cox has performed the best over the past year, and Janus leads over the past 5 years.
Note the varying amount of equity that each fund can hold, as shown in the descriptions above. Each manager's discretion varies between these funds. While "balanced fund" usually implies a fixed or stable stock-bond allocation, such as 60% stocks and 40% bonds, some of these fund managers have more discretion to change the level of stock holdings. For example, looking at the prospectus for Janus Balanced, we see that the fund manager can hold between 35% and 65% in equities. In contrast, Vanguard sticks to a firmer 60% equity guideline.
Turning to the topic of a do-it-yourself ETF portfolio, a balanced ETF portfolio using a combination of 60% VTI and 40% BND has seen these results:
  • 1-year return: 11.84%
  • 3-year return: 12.60%
  • 5-year return: 6.97%, with a maximum drawdown of -26.7% over the past 5 years.
Meanwhile, VBIAX has seen the following returns:
  • 1-year return: 12.18%
  • 3-year return: 12.70%
  • 5-year return: 7.07%, with a maximum drawdown of -27.0% over the past 5 years.
So VBIAX edges out the do-it-yourself ETF combo in all three time periods, but with a slightly higher maximum drawdown.
Risk-adjusted returns
Over the past year, Dodge & Cox has shown a 13.4% Modigliani risk-adjusted return, which is the best in this group. Over the past 5 years, Janus Balanced has shown the best risk-adjusted return, with a 12.5% Modigliani risk-adjusted measure.
To see a graphical comparison of risk and risk-adjusted returns, visit Balanced Portfolios: Risk & Risk-Adjusted Returns. The analysis uses standard deviation, maximum drawdown, beta, Modigliani, and alpha over the past 1, 3, and 5 years.
Risk vs. Return Scatterplot
The chart below plots Standard Deviation vs. Total Return for each portfolio. The most desirable spot is the top left corner, occupied by Janus Balanced (#5 on the chart).
Risk vs. Return Scatterplot
To see the 1-year and 3-year risk vs. return scatterplots, visit Balanced Funds: Risk vs. Return Scatterplots.
Now back to our questions at the beginning of the article:
Question 1: Which balanced fund is best on a risk-adjusted basis?
Answer: Janus Balanced is the clear winner on a 5-year risk-adjusted basis. If you have an appetite for more risk, Dodge & Cox Balanced has performed better over the past year, but slightly lags Janus Balanced over the 5-year period.
Question 2: Can I do better creating my own balanced ETF portfolio using 60% VTI and 40% BND?
Answer: Not likely. If you are interested in an easy 60-40 portfolio, you are probably better off (in terms of overall risk and performance) by simply buying VBIAX. The ETF portfolio does offer a 0.03% cost advantage over VBIAX, but for that extra $30 (if you have $100K invested) Vanguard's team will do the rebalancing for you.

Friday, July 5, 2013

3 Portfolios Inspired By Graham, Swensen, Browne: A Risk Vs. Return Analysis

As part of our ongoing effort to identify the best and worst asset allocation portfolios, we compare some ETF portfolios inspired by investing gurus: Benjamin Graham, David Swensen, and Harry Browne.
Here's our plan of attack:
1. Create an ETF portfolio that resembles each guru's target allocation, based on their investment philosophy, book, or other statements. These are static allocations, rebalanced monthly.
2. Crunch the numbers to get risk adjusted returns for the past 5 years for each portfolio.
3. Look at the risk/return metrics to see if there are any clear winners. Compare to some benchmarks, too.
Creating the Portfolios
First up, Benjamin Graham, the "Father of Value Investing." We have modeled a Graham-inspired Portfolio using 50% equity and 50% fixed income, implemented with a value and dividend tilt to the equity selections, as follows:
25% TIP (iShares TIPS Bond)
25% LQD (iShares Investment Grade Corporate Bond)
10% PFM (PowerShares Dividend Achievers)
20% EFV (iShares MSCI EAFE Value Index)
6.7% VTV (Vanguard Value)
6.7% VBR (Vanguard Small-Cap Value)
6.6% VOE (Vanguard MSCI Emerging Markets)
Second, David Swensen. He is the Chief Investment Officer of Yale University and author of Unconventional Success: A Fundamental Approach to Personal Investment. His target portfolio described in the book uses total-market funds, real estate, and inflation-protected securities (TIPS). We have modeled a Swensen-inspired portfolio as follows:
30% VTI (Vanguard Total Stock Market)
20% VNQ (Vanguard REIT)
20% VEU (Vanguard FTSE All-World ex-US)
15% TIP (iShares TIPS Bond)
15% TLT (iShares 20+ Yr Treasury Bond)
Third, Harry Browne. He suggests a simple, "permanent" allocation for weathering various market conditions. His Permanent Portfolio concept is designed to provide some diversification across several different market scenarios. We have create a Browne-inspired Portfolio as follows:
25% GLD (SPDR Gold Trust)
25% VTI (Vanguard Total Stock Market)
25% TLT (iShares Barclays 20+ Year Treasury Bond)
25% SHY (iShares Barclays 1-3 Year Treasury Bond)
Fourth, let's add a 50-50 portfolio. This is similar to the "Couch Potato Portfolio" espoused by the Dallas Morning News columnist Scott Burns. We've used TIP instead of a broader-based bond fund like BND.
50% VTI (Vanguard Total Stock Market)
50% TIP (iShares TIPS Bond)
Finally, for we'll add two more portfolios as benchmarks:
S&P 500 (represented by 100% allocation to SPY) plus a balanced 60-40 portfolio of 60% equities and 40% bonds (BND).
Crunching the numbers
Below is the annualized performance data through June. Looking at the 5-year column ('5y' on the chart), we see the annualized performance over five years is quite similar for these portfolios. However there have been striking differences over the past 12 months. The portfolios with more equity exposure have clearly outperformed. But this outperformance comes with extra risk, as we will see next.

(Click to enlarge)
Risk-adjusted returns
The 5-year risk-adjusted winner is the Browne portfolio with a 6% risk-adjusted annual return using the Modigliani-Modigliani metric. We prefer using the Modigliani-Modigliani ("M-squared") measure instead of the unitless Sharpe ratio. The Browne portfolio's alpha is 14.2% over the past 5 years, which is the best in this comparison. Also notable is the maximum drawdown that the Browne portfolio has experienced over the past five years: only 11%.
This compares favorably to the 42% drawdown that SPY has seen over the same period.
But over the past 1-year and 3-year periods, the 60-40 portfolio has offered the best risk-adjusted returns. The maximum drawdown for the 60-40 portfolio is 27% over the past 5 years.
To see a graphical comparison of risk and risk-adjusted returns visit Inspired Portfolios: Risk Metrics. The analysis uses standard deviation, drawdown, beta, Modigliani, and alpha over the past 1, 3, and 5 years.
Risk vs. Return Scatterplot
The 5-year risk vs. return scatterplot (below) shows these portfolios have similar returns but different risk levels.
The S&P 500 benchmark portfolio (#6 on the chart) occupies the high-risk/high-return corner. Note that the 60-40 portfolio (#5 on the chart) and the Browne portfolio (#4 on the chart) offer similar returns at significantly lower risk. To find the Browne portfolio on the chart, look for #4 at the top left, slightly obscured by the Y-axis.
To see the 1-year and 3-year risk vs. return scatterplots, visit Inspired Portfolios: Risk vs. Return Scatterplots.
The 60-40 portfolio has outperformed these "guru inspired" portfolios, and it's hard to beat the simplicity of a two-ETF portfolio. But the 60-40 portfolio has been riskier than the Browne portfolio over the last five years. The Browne portfolio is worth a look if you can stomach some of the recent underperformance due to its gold holdings.