Investment Portfolio & Risk Analysis

Question / Objective

Compare the historical risk and return profile of five common asset classes, then evaluate how a sample diversified portfolio built from them would have performed on a risk-adjusted basis — a foundational exercise in modern portfolio theory.

Course-Concept Connection

• Investment Principles
• FIN 3033 — Principles of Investment
• FIN 4423 — Investment Portfolio Management

Data Sources

• lazyportfolioetf.com — SPY (S&P 500 ETF) risk/return statistics — as of Aug 31, 2026
• lazyportfolioetf.com — QQQ (Nasdaq-100 ETF) risk/return statistics — as of Aug 31, 2026
• lazyportfolioetf.com — VXUS (Total International Stock ETF) risk/return statistics — as of Aug 31, 2026
• lazyportfolioetf.com — GLD (Gold Trust) risk/return statistics — as of Aug 31, 2026
• iShares — AGG (Core U.S. Aggregate Bond ETF) official fund fact sheet — as of Jun 30, 2026
• FRED — 3-Month Treasury Bill Secondary Market Rate (risk-free rate) — as of Sep 14, 2026

Methodology

1. 1.Collected 5-year annualized return and standard deviation for four ETFs representing distinct asset classes: SPY (U.S. large-cap equity), QQQ (U.S. tech-heavy equity), VXUS (international equity), and GLD (gold).
2. 2.Sourced AGG (U.S. investment-grade bonds) risk/return data from its official issuer fact sheet, using the 5-year annualized NAV return and the 3-year standard deviation (AGG's 5-year standard deviation was not available from the same source as the other four assets — see Limitations).
3. 3.Calculated each asset's Sharpe ratio using the current 3-month Treasury bill rate as the risk-free rate proxy.
4. 4.Built a sample diversified portfolio (40% SPY / 15% QQQ / 15% VXUS / 20% AGG / 10% GLD) and computed its weighted-average return and a naive weighted-average risk figure.
5. 5.Compared the sample portfolio's risk-adjusted return against a single-asset (SPY-only) benchmark.

Assumptions

• The sample 40/15/15/20/10 portfolio weighting is illustrative, chosen to represent a moderate-growth allocation — it is not a personalized or optimized allocation for any individual investor.
• Because asset correlation data wasn't available from these sources, the portfolio's risk is shown as a weighted average of individual asset standard deviations. This is a simplification: true portfolio volatility is normally lower than this figure, since diversification benefits (imperfect correlation between assets) reduce combined risk below a simple weighted average.
• AGG's return (5-year window) and standard deviation (3-year window) come from slightly different measurement periods, which affects comparability with the other four assets.

Analysis

Key Findings

• Gold (GLD) posted the strongest 5-year risk-adjusted return of the group (Sharpe ≈0.93), reflecting a strong five-year run; GLD also carried a standard deviation in the same range as U.S. equities.
• Bonds (AGG) delivered a strikingly low 5-year annualized return (0.09%) — a direct result of the 2022 rate-driven bond selloff (AGG fell 13.06% that calendar year per its fact sheet), illustrating interest rate risk in fixed income even for high-quality, investment-grade holdings.
• The sample diversified portfolio's naive weighted-average return was about 10.5% with a naive weighted-average risk of about 14.5% (Sharpe ≈0.45) — lower than SPY alone on this simplified basis, which is expected: true diversification would likely improve this figure, since the naive calculation ignores the risk-reducing effect of imperfect correlation between asset classes.
• QQQ delivered the highest raw return (14.2%) among the four ETF-sourced assets but also the highest standard deviation (20.9%), consistent with its concentrated, growth-heavy composition.

Limitations

• • Risk/return figures are drawn from third-party ETF data providers, not computed from raw daily price data, and cover slightly different exact date ranges across sources.
• • The portfolio risk calculation is a simplified weighted average, not a true covariance-based portfolio standard deviation — it should be read as a rough upper bound on risk, not a precise figure.
• • This is an educational analysis only. It is not investment advice, and the sample portfolio is not a recommendation to buy, sell, or hold any security.