In Need of Performance Update

One of my blog projects for the year is to get more organized by converting drafts to completed posts.

With a bit more work, incomplete drafts can become completed posts. Entering this year, I had over 30 entries in the “drafts” folder—some in excess of 450 words, which is my usual target. Completing these long drafts is a major coup because for less than the time it takes me to finish one from scratch, I can easily generate two, three, or even four complete posts.

With regard to these drafts, I typically write something like:

     > In the longshot case that someone out there could possibly benefit
     > from any of this, what follows is this post from August 2018.

Some of the drafts are well thought out, but I honestly have no idea where they fit. Some are without reference links to guide me. Some (like this one) are excessively complex and hard for me to decipher. I have no excuse for the latter except poor writing, quite honestly. Because they are just drafts I’m looking to complete, I include them and leave the decryption to you.

What follows is especially “in case someone out there could possibly benefit” content. Although it reminds me that a performance update is overdue, I am not sure what six-year period is being described. Perhaps when I go back and calculate performance, I will be able to resolve what follows. This post is therefore a call to action as stated in the title.

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Keep in mind that my performance during said six year window, as discussed last time, was disappointing. However, showing performance since I started trading full-time provides evidence that I have done well overall. I believe the approach I have used recently is more disciplined, systematic, and therefore better than what I did in the early years of 2010 – 2014.

Then again, my stated 2010 – 2014 performance is not exactly bad. The high standard deviation (SD) hurts but that SD is to the upside. Upside SD will not cause sleepless nights, which is why a separate statistic differentiates upside from downside variance (Sortino Ratio). My 2012 return in excess of 50% is a major contributor to the high SD, which leaves risk-adjusted return much to be desired. Realistically speaking, though, clients would never complain about that.

Also with regard to multiplicative versus additive, what shocked me was to see a 10% improvement on the RAR ratio amounting to only 79 basis points. The problem with RAR is that it is unitless. 79 basis points is not 79 basis points, either. From 10% to 10.79% is only a 7.9% improvement whereas from 5% to 5.79% is a 15.8% improvement. When thinking in terms of management fee and overall compounded returns, we think about the additive difference.