The table above, (courtesy of StatPro), shows various performance statistics for the JIC Portfolio and the FTSE All Share Index since 1st January 2012.
Although I do not manage the portfolio against any particular benchmark, (after all I am just trying to make money to pay the bills) it is nevertheless interesting to compare the volatility and Sharpe Ratio of the portfolio against the FTSE-All Share Index.
Volatility is a measure of the variation in price of a financial instrument over time; Simply, the higher the volatility the higher the swings up and down and is deemed to be more risky. In the table you can see the annualised volatility of JIC, (12.599%) has been slightly higher than the FTSE All Share Index, (11.456%).
The Sharpe Ratio is a measure of the excess return,(the return over and above the risk free rate) that has been achieved taking volatility into account. A high Sharpe Ratio signals that a good return is being achieved relative to the volatility,(risk), being taken. The higher the better!
So, although the annualised volatility of JIC has been slightly higher than the FTSE All Share the returns achieved have been far higher,(52.7% v 27.2%) leading to a good Sharpe Ratio of 2.338 compared to 1.327 for the benchmark.
In general I am happy with the results so far but would be happier if I had achieved a lower Annualised Volatility, thus increasing the Sharpe ratio further.
Of course, 19 months is a relatively short period of time; it will be instructive to see how things develop in the coming months and when we enter a prolonged "bear" period.
Filed Under: Stock Picks,
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