Tuesday, 21 January 2014

Just How Good Are Minimum-Complexity Portfolios?

In order to showcase the performance of minimum-complexity portfolios versus highly complex ones, two such portfolios have been built with stocks from the Dow Jones Index. A nasty period, which included the Internet Bubble, has been chosen: 2000-2004. We confronted the performance of both portfolios with that of the index itself. This has been done in four distinct periods.Here are the results.

In terms of numbers we have the following results:

While the Dow has reported a total loss of 4.2% during the entire 4-year period, the high-complexity portfolio produced gains of 6.3% and the low-complexity one an impressive 24.1%. In turbulence, simpler is better.

Minimum-complexity portfolios may be obtained at www.assetdynex.com