Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Major Asset Classes July 2021 Risk Profile

By James PicernoMarket OverviewAug 04, 2021 07:40AM ET
www.investing.com/analysis/major-asset-classes-july-2021-risk-profile-200596003
Major Asset Classes July 2021 Risk Profile
By James Picerno   |  Aug 04, 2021 07:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

An extraordinary run of low risk persists for the Global Market Index (GMI), an unmanaged, market-value-weighted portfolio that holds all the major asset classes (except cash). After the benchmark posted another monthly gain in July, risk-adjusted performance ticked higher once again.

GMI’s 10-year Sharpe ratio (SR) edged up for a fifth straight month to 0.86, the highest since January 2020, based on a rolling ten-year window via monthly data. A Sharpe ratio of 1.0 equates with return matching risk (return volatility) and higher (lower) Sharpe ratios indicate higher (lower) risk-adjusted performance.

GMI Rolling 10 Yr Annualized Sharpe Ratio
GMI Rolling 10 Yr Annualized Sharpe Ratio

Profiling GMI through a drawdown lens also reflects an extended stretch of low risk. For a sixth month in a row through July, GMI’s peak-to-trough decline has been zero, courtesy of the index’s ongoing rally to new highs.

GMI Drawdown History
GMI Drawdown History

GMI represents a theoretical benchmark for the “optimal” portfolio. Using standard finance theory as a guide, this portfolio is considered a preferred strategy for the average investor with an infinite time horizon.

Those assumptions are, of course, unrealistic in the real world. Nonetheless, GMI is useful as a baseline to begin research on asset allocation and portfolio design. GMI’s history suggests that this benchmark’s performance is competitive with active asset-allocation strategies overall, especially after adjusting for risk, trading costs, and taxes.

For additional context, readers can use this basic risk profile for GMI alongside the current monthly updates on performance (see the asset classes link above) and expected return for the benchmark and its components.

The table below presents additional risk metrics for GMI and its underlying asset classes, based on a trailing 10-year window through last month.

Performance And Risk Summary
Performance And Risk Summary

Here are brief definitions of each risk metric:

  • Volatility: annualized standard deviation of monthly return
  • Sharpe ratio: ratio of monthly returns/monthly volatility (risk-free rate is assumed to be zero)
  • Sortino ratio: excess performance of downside semi-variance (assuming 0% threshold target)
  • Ulcer Index: duration of drawdowns by selecting negative return for each period below the previous peak or high water mark
  • Maximum Drawdown: the deepest peak-to-trough decline
  • Beta: measure of volatility relative to a benchmark (in this case GMI)
Major Asset Classes July 2021 Risk Profile
 

Related Articles

Major Asset Classes July 2021 Risk Profile

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email