First Step: Evaluate all possible portfolios. Second Step: Pick the best one.
ETFs are instruments that provide unique flexibility, liquidity, scalability, and diversification. There are all sorts of ETF types, such as those based on equities, bonds, REITs, index funds, sector-based funds, and contrarian to the market among many others.
Thus, whether you are an active or a passive investor, using ETFs to allocate your investment portfolio is a good option, however, the question remains: How to allocate my portfolio, so that it resists crises and busts and grows when the market booms?
The ideal method to build a strong investment portfolio for all seasons is to evaluate all possible portfolios in terms of profitability and risk and to choose the one that had the highest profitability and lowest risk in the long term. To do this a specialized app is needed, such as clickinvesto.com.
A large number of portfolios are plotted in a profitability vs risk chart; each dot represents a different portfolio. The portfolios to the lower right-hand side are the ones with a better performance in time.
How is risk evaluated?
It is commonly believed that the greater the volatility, the greater the risk. However, in very practical terms, the volatility is negative when the value of a security goes down. If it goes up it is not bad; it is awesome.
Thus clickinvesto.com measures the risk as the number of falling periods vs the total number of periods since a portfolio or a fund exists (since inception).
How is profitability evaluated?
Clickinvesto.com takes the CAGR (Compound Annual Growth Rate) of every portfolio to measure its profitability on the values including dividends.
Short-term or long term
There are investments with explosive growth in the short term that eventually go bust. A passive investor needs a portfolio that withstands the test of time. Clickinvesto.com mostly uses funds that have been around for decades, or at least for one big crisis.
Past performance does not guarantee future performance
This statement is true for most value investors, however, it’s useful to know which portfolios have resisted crises better than others.
Normally investors tend to allocate a portion of their portfolio to fixed-income tools such as bonds to dampen potential losses in a crisis and another portion to equities, to make the portfolio grow when the economy does. This is a logical decision to make, but is it the best strategy? Has it proven to be the best decision?
Clickinvesto.com test a large number of portfolios in the long term against a reference, so you can choose the best-performing one. If a portfolio has kept profitable after 2, 3, or more large crises, there are good chances it will withstand (or at least recover fast) the next one.
Try clickinvesto.com for free: test as many portfolios as you want
