standard deviation measure?

horlocks

Using the portfolio analysis tool on my platform, it reckons my porfolio has a 5 year median return of 6% and standard deviation of 9%.
My portfolio is 80 stocks/20 bonds. I expected a 80/20 stocks/bonds portfolio to have an SD of around 15-20%.
My allocations are all Vanguard funds, Vanguard EM, World High Yield, Global Small Cap, LifeStrategy 100%, Bonds.
Am I wrong in thinking the SD would be higher or does this look about right for this type of holding?

Playing_with_Fire_2

I'm not sure how your platform is calculating the SD and what split you have however:

Bonds tend to increase as stocks decrease; the platform may be modelling this and reducing the SD to compensate.

Investing in a number of different markets will reduce the SD, but not necessarily as much as your platform is calculating. Eg the EM fund may dip because of a local event or confidence in that specific market, or because of a global event. When indices are less correlated, the SD would decrease. If, however, your platform is calculating the volatility of each index/component and then modelling them as independent, then you may end up with an SD on the low side.

Over 5 years, 9pp looks reasonable to me, but if the SD is important to your risk tolerance/asset allocation I'd suggest running the numbers yourself (or creating a dummy portfolio for each component and then blending them), rather than relying solely on the platform tool.

Drp8713

My (limited) understanding is that if you average return was 6% and the SD 9% that in the majority of years you would expect between -3% and 15% return, but that is based on the last 5 years which have been pretty generous returns wise, so unless its using 10+ years info to calc the SD and that info includes up and downturns in the market then its not going to be worth much. Its bascially saying if we have another 5 year bull market then you wont get much volitility.