January 2025
Risk-adjusted returns
There are basically two types of retail investor. Those that look only at balances on month-end and year-end statements. Some in this category hardly ever look at the data and do so, only if conversing with an investment or tax advisor. Or if compelled by other circumstances such as applying for a mortgage, student loan, etc. It is not a practice to be encouraged, but it happens.
Then there is the individual who takes statement balances a step further and wants to know the performance of the account overall, as well as the individual securities that comprise the portfolio. That is commendable. However, the return data can be both enlightening and misleading.
Looking at the rankings of the top five securities measured by unadjusted performance from the beginning of 2024 up to December 12th, you will see that Nvdia is at the top followed by, Walmart, Meta, Tsla and Goldman Sachs. Note that AT&T and Crowdstrike Holdings did not make the top five list.
On the other hand if you look at the table ordered by a measurement that takes risk into consideration along with returns, you get a different picture. Now, Walmart is right at the top of the list above media darling Nvdia! Even AT&T is right up there at number four on the list. Note also that when returns were factored for riskiness of the securities, the Consumer Non-Cyclical company came out on top (Walmart) over the Technology entity (Nvidia).
