April 24, 2024

Tutorial: Portfolio Score

Note: Specific investments described herein do not represent all investment decisions made by Global Predictions. The reader should not assume that investment decisions identified and discussed were or will be profitable. Specific investment advice references provided herein are for illustrative purposes only and are not necessarily representative of investments that will be made in the future.

Learn how to use the Portfolio Score and Analysis page to help try to better your portfolio. Happy investing!

Portfolio Score

The Portfolio Score is a quick way to understand how your portfolio is doing. This score combines your personal investment preferences, risk & returns, and macro exposure as a guide for portfolio improvement.

The three components of the Portfolio Score are:

Risk Match - Current portfolio risk compared to your preferred risk profile
Risk-adjusted Return - Expected performance over portfolio risk (calculated as the Sharpe Ratio)
Downside Protection - Protection against possible scenarios of extreme stress and other sources of uncertainty (i.e. tail risk)

See the Portfolio Score and its component at the top of the Overview page:

Or go to the Analysis page to get an in-depth look at how each of the components of your Score are calculated:

Analysis page showing breakdown of Portfolio Score components

Risk Match Score Component

The Risk Match measures your current portfolio risk compared to your preferred risk profile. The closer the match, the higher the Risk Match Score component. It very important to make sure that you are not taking more or less risk than you are comfortable with, as your risk preference is crucial to portfolio management. Note: as markets move your portfolio's risk will change, one of the main reasons to rebalance your portfolio periodically.

Risk-adjusted Return Score Component

Risk-adjusted return is the expected performance over portfolio risk (calculated as the Sharpe Ratio). This means the overall expected performance (weighted-sum over all the individual securities) divided by the overall portfolio volatility (non-linear combination of all the individual security volatilities).

It is worth optimizing how all the securities in your portfolio fit together, as you will be able to get dramatically better overall returns if you think about your portfolio as an interconnected puzzle rather than a set of individual securities. It's useful to hold a set of uncorrelated securities so that all your investments don't rise and fall at the same time. The Risk-adjusted Return tab shows the marginal contribution of each security in your portfolio to the Sharpe Ratio, making it easy to see how each investment contributes, given the rest of the current portfolio.

Analysis page "Risk-adjusted Return" tab

Downside Protection Score Component

Risk comes in many different forms. This last tab measures your protection against possible scenarios of extreme stress and other sources of tail risk. Ultimately, its worth measuring your portfolio's influence to various macroeconomic drivers so that you can neutralize external threats (whether you see them coming or not). This part of the system helps you keep a truly diversified portfolio, spread out across countries, sectors, asset classes, and also protects against surprises in inflation, GDP growth, credit conditions, market liquidity, commodities, and interest rates.

How optimized is your portfolio?

PortfolioPilot is used by over 22,000 individuals in the US & Canada to analyze their portfolios of over $20 billion¹. Discover your portfolio score now:

1: As of July 14, 2024

Global Predictions provides investment advice only through its internet-based application, PortfolioPilot, and only to individuals who are advisory clients of Global Predictions pursuant to written advisory Client Agreements ("Advisory Services"). The publicly available portions of the Platform (i.e., the sections of the Platform that are available to individuals who are not party to a Client Agreement - including globalpredictions.com and portions of portfoliopilot.com) are provided for educational purposes only and are not intended to provide legal, tax, or financial planning advice. To the extent that any of the content published on publicly available portions of the Platform may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Nothing on the publicly available portions of the Platform should be construed as a solicitation or offer, or recommendation, to buy or sell any security. All charts, figures, and graphs on the publicly available websites are for illustrative purposes only. Before investing, you should consider whether any investment, investment strategy, security, other asset, or related transaction is appropriate for you based on your personal investment objectives, financial circumstances, and risk tolerance. You are also encouraged to consult your legal, tax, or investment professional regarding your specific situation. Registration does not imply a certain level of skill or training. Investing involves risk. The value of your investment will fluctuate, and you may gain or lose money.

The contents of the Platform may contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about the financial industry, the economy, or Global Predictions itself. Forward-looking statements are not guarantees of the underlying expected actions or future performance and future results may differ significantly from those anticipated by the forward-looking statements. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Note: our use of the term AI refers to all artificial intelligence models used including large language models, proprietary economic models that incorporate regression or dynamic factors, and machine learning methods like supervised learning.

1. As of July 14, 2024
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2. As of July 14, 2024
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3. $20B Assets on Platform as of July 14, 2024. Aggregated across all plans (including the free plan). Assets on Platform represent the total value of connected and manually inputted accounts (including assets like real estate and private equity) and does not in any way represent Asset Under Management as Global Predictions does not manage any client funds.

4. Global Predictions Secures a Winning Spot in Internacional M6 Financial Forecasting Competition

5. Comparison made to an individual with $1M AUM, paying an "average wealth manager fee" of 1.02% based on a 2023 study by AdvisoryHQ. 1.02% * 1M = $10,200 per annum. PortfolioPilot Gold pricing is $29/mo * 12mo = $348 per annum. 348/10,200 – 1 = ~97% lower. Actual fees paid to any individual financial advisor will depend on specific financial circumstances and arrangements.

7. The 1.94% referenced figure represents the average calculated monthly continuous tax-loss harvesting gain over a 4-year period from 2018-2021 in the 2024-published JP Morgan report titled "Continuous tax-loss harvesting yields more potential for tax savings" (link).

8. Case studies presented are hypothetical scenarios and intended for illustrative purposes only. They do not represent an actual client, investment or experience, but rather are meant to provide an example of the intended investment process and methodology. An individual's experience may vary based on his or her circumstances. There can be no assurance that the Firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the Firm's investment advisory services. The information contained herein should not be construed as personal investment advice.

9. The financial advisor described in this marketing language is referring to you, the reader. PortfolioPilot is meant to be an aid to the self-directed investor. "Complete financial advice" refers to the fact that PortfolioPilot includes estate planning, tax optimization, net worth visualization, and scenario modeling, not just investment recommendations. See globalpredictions.com/disclosures for descriptions of conflicts of interest, use of AI, bias, and any other disclosures for Global Predictions Inc.

10. This analysis is based on data from publicly available reports, academic studies, and articles. Sources include Mullainathan et al. (2012): Study highlighting biases in financial advice and its misalignment with client interests; Morningstar (2024): Report on typical update frequencies from financial advisors; Bodnaruk and Simonov (2014): Research on the limited impact of financial expertise on investment outcomes; Financhill: Insights on hidden fees in financial advising, including expense ratios and transaction costs, as noted by Warren Buffett; Foerster et al. (2014): Study on the costs of financial advice, including average AUM fees of 2.43%.