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Good back tester that includes rebalancing
Old 11-28-2015, 05:08 AM   #1
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Good back tester that includes rebalancing

Good Morning
I'm "revamping" my investement policy a little. I basically follow an "Ivy league" type layout. 40% stock, 40% bond, 20% "alternatives" (REits, mReit, BDC, Commod, etc.) With stocks, I tilt toward value / small cap. And so I would like to find out how big of a difference it makes in separating large from small company and rebalancing when they get out of whack, vs. just investing in "total stock" and adding a small cap value tilt. In case that's still not clear, I'd need a back test or other means to determine if there's any "alpha" in having for example, Large cap fund + small cap value fund, rebalancing to keep the percentages where I put them, instead of a total stock market fund with a small SC value fund to tilt it.

If I decide to go with Total market, of course I'd just go with vanguard total stock, but if break it up, whcih of Vanguard's funds would be best suited to represent a plain vanilla US LC fund?

(PS, I will also have International, emerging market, etc.)

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Old 11-28-2015, 06:58 AM   #2
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Something like VOO?
  • Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies.
  • Goal is to closely track the index’s return, which is considered a gauge of overall U.S. stock returns.
  • Offers high potential for investment growth; share value rises and falls more sharply than that of funds holding bonds.
  • More appropriate for long-term goals where your money’s growth is essential.

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Old 11-28-2015, 07:29 AM   #3
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I use vanguard total stock, some mid cap and very little international. I just started using the Vanguard municipal bond ETF.......we'll see what happens. I look at 5 and 10 year average returns.........they've worked best for me over the years. Good Luck
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Old 11-28-2015, 08:44 AM   #4
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Portfolio Charts | a picture is worth a thousand calculations might have want you're looking for, hotwired. They even have some pre-mixed portfolios in the mix, including ivy league and some with small/value tilts. I believe the calculator rebalances automatically.
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Old 11-28-2015, 08:48 AM   #5
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Something like this?
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Old 11-28-2015, 09:06 AM   #6
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Originally Posted by hotwired View Post
I'd need a back test or other means to determine if there's any "alpha" in having for example, Large cap fund + small cap value fund, rebalancing to keep the percentages where I put them, instead of a total stock market fund with a small SC value fund to tilt it.
Short answer: Total stock is a large cap fund and there will be no significant difference between your two strategies.

More detail:

The closest tool to what you are asking I think would be simba's backtesting spreadsheet: . But I don't think this will be helpful because

(1) for all intensive purposes Total Stock is a large cap fund. Just plot total stock and any large cap index (not value based) on morningstar or other tool and you'll see 99% correlations.

(2) Due to point 1, the effect size from rebalancing is going to be tiny and Simba's spreadsheet (and similar tools) won't have enough data to answer your question with any reliability. I think in Simba's spreadsheet the data only goes back to the 70s. Plus there are only a few funds to listed to make a portfolio.

(3) Large cap funds (as opposed to total stock) tend to have (small) negative size loadings which would probably eat into any miniscule "alpha" you might generate from rebalancing.
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Old 11-29-2015, 11:38 AM   #7
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My favorite, EZBacktest:
Free Download: EzBackTest: About/Screenshots

* Multiple portfolio files

* Try different re-allocation schemes

* Quick link to quotes

* Calculate portfolio's dividends yield, sharpe ratio, annualized returns, Standard Deviation

* Measure and compare performance directly on graph

* Cache downloads within single usage instance to allow quick adjustments to portfolio and recalculation

* Create Correlation Matrix

* Compare saved portfolio to achieve: Sharpe Plots, Monthly performance graphs, Sharpe bars, year over year returns

* Bull/Bear strategic allocation simulation over simple-moving-average-cross signals

* Simple-Moving-Average trader simulation

* 5% Reallocation Bands

* Cost Average Simulation

* Artificial Intelligence Sharpe Optimization

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