How to Invest Wisely Using The Metric That Spooks Fund Companies

Published: February 7, 2017

Summary

 

There is one metric that many mutual fund providers avoid: Maximum Drawdown.

 

Maximum Drawdown measures the largest peak-to-trough fall in value for a portfolio.

 

But we can use this metric and the MAR Ratio to evaluate the risk vs. return trade-off, and separate the winners from the losers.

 

We identify portfolio recipes with annual returns ranging from 4.2% to 14.8% that have a better-than-average MAR Ratio.

 

What is the metric that mutual fund providers fear?

 

This metric has the power to make a decent-looking fund or portfolio look quite dreadful. You can't find this metric on the websites of Morningstar, Yahoo, Vanguard, or Fidelity.


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