Roger Gibson’s 5 Asset Portfolio – Strategy, Allocations, Performance, Returns Analysis
The 5 Asset Portfolio by Roger Gibson is a “lazy” index diversified portfolio that allocates assets across 4 asset classes: stocks, bonds, REITs, and commodities. These 4 asset classes are divided into 6 categories: U.S. stocks, international stocks, U.S. bonds, international bonds, U.S. REITs, and commodities.
The 5 Asset Portfolio strategy can be implemented using 6 different index ETFs that are well diversified and perform well. There is no need to pick individual stocks, bonds, and other asset classes, thus avoiding spending much time and effort on allocations.
In this article, we will describe in detail the structure of The 5 Asset Portfolio and backtest it on historical price data. Looking ahead, we can say that according to our backtests over the past 16 years, The 5 Asset Portfolio has the following performance stats:
- Compound annual return (CAR): 4.47%;
- Maximum drawdown (MDD): -48.28%;
- CAR/MDD ratio: 0.09;
- Standard deviation: 16.39%;
- Sharpe ratio (with a risk-free rate of 3%): 0.09.
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Who Is Roger Gibson
Roger is best known as the author of the classic investment book Asset Allocation: Balancing Financial Risk (McGraw-Hill). First published in 1989 and released in its fifth edition in 2013, it remains the best-selling book on asset allocation. The book is published in German, Japanese, Korean, Chinese, Indian and Russian.
Roger Gibson has been a frequent speaker for investment professionals at national and international conferences for 30 years. He is a member of the steering group and former chairman of the Fiduciary Standards Committee, a group of leading financial advisors working to meet stricter standards for all those who give investment advice.
Roger is a Certified Financial Analyst (CFA) and holds an MBA from Carnegie Mellon University.
What Is The 5 Asset Portfolio
The 5 Asset Portfolio consists of the 6 following asset categories with their respective total weights:
| Asset category | Weight in the portfolio |
| U.S. Stock Market | 20.00% |
| International Stock Market | 20.00% |
| U.S. REITs | 20.00% |
| U.S. Bonds | 14.00% |
| International Bonds | 6.00% |
| Commodities | 20.00% |
Stocks In The 5 Asset Portfolio
Stocks are equity securities representing an ownership share in a corporation and giving the right to receive dividends if paid.
Historically, stocks have shown the highest returns, outperforming all other asset classes such as bonds, gold, and real estate. Thus, you have been rewarded for taking this risk.
Adding stocks to a portfolio increases its overall return but makes the portfolio more volatile and more vulnerable to drawdowns during times of crisis.
The 5 Asset Portfolio includes the following types of stocks:
- U.S. Stock Market – U.S. mid- and large-cap growth and value stocks that virtually replicate the benchmark U.S. stock index S&P 500;
- International StockMarket – non-U.S stocks that allow you to increase diversification by reducing the overall correlation of the portfolio. International stocks are located on other continents (Europe, Asia, Pacific, etc) and have a low correlation with U.S. stocks.