Risk comes in many shapes and forms. In academia and in much of the investing industry, risk in investing is measured by standard deviation (a measure of how much the price of an asset bounces around).
Now, a standard deviation is, well – academic. This is because, for you and me, the risk is the pain we go through when we lose money. That pain is called draw-down. The draw-down of a portfolio is the amount of money the portfolio will lose in a given year. So, for example, a portfolio with a draw-down of -20% has at some point lost 20% of its value. That’s a good indication of what could happen in the future.
Now, that’s pretty actionable information that we can plan around and relate to.
A rough rule of thumb is that for each 20% of stocks a portfolio has it has a draw-down of -10%. So a 100% stock portfolio has potentially a draw-down of -50%. A 60% stock portfolio has a potential draw-down of -30%.
There are other forms of risk however but the draw-down is what we will focus on when dividing the portfolios into the various risk levels. You should also look at standard deviation as well as the stock to bond ratio.
How the risk levels are determined
We have given the portfolios a risk level from one to three. = 1 – 3.
1 is the least risky but also offers the least reward.
3 is the riskiest but offers the most rewards.
The portfolios have been divided into tertiles. In the first tertile, the first 33.3% represent the portfolios that have the lowest draw-downs. The last 33.3% are the ones with the highest draw-downs.
This page is displaying the low-risk portfolios. They are suited for short term savings and even then you may be better off with a CD (certificate of deposit) or a standard savings account.
Low-risk portfolios
Name
See Portfolio
Asset class count
Year to date
Return in 2020
10 year return
CAGR since 1989 (%)
STDEV
Draw Down
Risk level
Expense ratio
The Permanent Portfolio
4
-1.38%
16.15
6.62
7.25
5.87
-3.15%
1
0.14%
Premium Portfolio
5
-1.49%
16.01
7.76
8.64
7.31
-3.71%
1
0.16%
The Marc Faber Portfolio
6
-0.66%
10.78
6.63
8.12
9.06
-16.81%
1
0.11%
Allan Roth Second Grader Low Portfolio
3
-0.59%
10.72
6.09
7.29
6.21
-8.20%
1
0.04%
Allan Roth Second Grader Five-Fund Low Risk Portfolio
4
-0.59%
10.2
5.99
7.28
6.1
-8.20%
1
0.04%
Allan Roth Second Grader Low Risk with CDs Portfolio
3
-0.06%
5.6
3.81
5.04
5.3
-10.34%
1
0.11%
Larry Swedroe, The Larry Portfolio 1
7
0.13%
7.25
5.38
7.36
6.68
-7.67%
1
0.10%
Larry Swedroe, The Larry Portfolio 2
3
0.42%
5.97
4.75
7.23
5.37
-2.92%
1
0.13%
Larry Swedroe, Eliminate Fat Tails Portfolio (value tilt)
4
1.59%
5.87
3.72
6.93
7.98
-13.55%
1
0.10%
William Bernstein Four Pillars Low Risk Portfolio
4
-0.09%
9.76
6.58
7.38
8.04
-15.91%
1
0.05%
Rob Arnott Portfolio
8
-0.48%
7.12
5.42
7.39
7.15
-14.71%
1
0.17%
Premium Portfolio
8
-1.03%
11.83
7.63
8.46
8.56
-15.60%
1
0.10%
Meb Faber Risk Parity Portfolio
7
-0.64%
9.57
5.03
7.09
5.91
-7.34%
1
0.14%
Robo Advisor Betterment 40
11
-0.07%
8.29
6.01
7.64
7.68
-13.47%
1
0.07%
Harry Markowitz Father of Modern Portfolio Theory Portfolio
2
-0.54%
14.37
8.95
8.83
9.25
-15.92%
1
0.04%
Rick Ferri Transitional Moderate Basic Portfolio
5
-0.46%
11.45
7.38
7.97
8.56
-17.05%
1
0.05%
Rick Ferri Mature Retired Saver Moderate Basic Portfolio
6
-0.38%
9.77
6.34
7.4
6.93
-12.22%
1
0.05%
Rick Ferri Mature Retired Saver Moderate Multi Asset Portfolio
10
0.06%
8.66
6.13
7.58
6.99
-12.57%
1
0.06%
Balanced Portfolio 10/90
2
-0.72%
9.04
4.85
6.68
4.78
-2.41%
1
0.04%
Balanced Portfolio 20/80
2
-0.67%
10.37
5.9
7.26
5.47
-3.28%
1
0.04%
Balanced Portfolio 30/70
2
-0.63%
11.71
6.93
7.81
6.53
-7.49%
1
0.04%
Premium Portfolio
2
-0.58%
13.04
7.94
8.33
7.83
-11.71%
1
0.04%
Premium Portfolio
2
-0.54%
14.37
8.95
8.83
9.25
-15.92%
1
0.04%
Index Fund Advisors, Portfolio 40
16
0.65%
5.89
5.09
6.89
6.93
-13.07%
1
0.10%
Index Fund Advisors, Portfolio 30
16
0.40%
5.68
4.35
6.2
5.36
-8.79%
1
0.09%
Index Fund Advisors, Portfolio 20
16
0.14%
5.47
3.59
5.49
3.93
-4.51%
1
0.08%
Index Fund Advisors, Portfolio 10
16
-0.11%
5.26
2.82
4.75
2.86
-0.23%
1
0.07%
Paul Merriman Best-in-Class ETFs Portfolio (Conservative)
Institute of Business and Finance Income Portfolio
Coming soon
4
-0.35%
6.31
4.42
6.72
5.56
-4.07%
1
0.15%
J. D. Steinhilber Conservative Growth
Coming soon
-0.19%
8.47
5.33
6.77
6.55
-12.25%
1
0.09%
J. D. Steinhilber Moderate Growth
Coming soon
10
-0.09%
11.06
6.28
7.7
8.57
-17.23%
1
0.09%
Larry Swedroe Model Portfolios Conservative
Coming soon
12
0.66%
4.61
4.57
6.69
6.53
-11.68%
1
0.08%
Premium Portfolio
10
-0.68%
8.9
7.56
8.6
7.8
-13.87%
1
0.08%
Dr. Marvin Appel One-Decision Portfolio
Coming soon
8
0.28%
4.66
6.62
7.77
7.89
-16.38%
1
0.10%
Goldman Sachs Target Date Retirement Income Portfolio
9
-0.76%
6.1
6.66
8.17
8.19
-16.50%
1
0.13%
Rob Arnott ETF.com model portfolio
Coming soon
7
-0.41%
6.11
5.51
7.61
7.89
-16.70%
1
0.21%
Disclaimer: There are many factors that go into choosing your right portfolio, though not as many as you would think. Therefore, the information here presented are not specific recommendations but instead for information purposes only.
Now it’s your turn!
Which portfolio are you leaning towards and why?
Why do you think a low-risk portfolio is right for you?