The Ideal Index Portfolio by Frank Armstrong seeks to increase return and reduce risks through smart asset choices and modern portfolio principles.
Home Country
Portfolio Charts is able to translate portfolio information to the local currency, inflation, and available funds of many different countries. Choose the home country where you live, and it will update every section of the page.
Asset Allocation
How to build an Ideal Index Portfolio
| % | Asset Class |
|---|---|
| 31% | Australia Large Cap Blend Stocks |
| 31% | Developed World Large Cap Blend Stocks |
| 30% | Australia Treasury Bills |
| 8% | United States Real Estate Investment Trusts |
Read about each asset: Australia Large Cap Blend Stocks, Developed World Large Cap Blend Stocks, Australia Treasury Bills, and United States Real Estate Investment Trusts.
Asset Notes
The Portfolio Charts tools use round numbers, so I reallocated the portfolio slightly while preserving the original design intent as closely as possible.
Author
Frank Armstrong
Frank Armstrong is a financial adviser and the founder of Investor Solutions. He writes about the Ideal Index Portfolio in the book The Informed Investor.
Overview
A true student of financial theory, Armstrong presents the Ideal Index Portfolio as a well-considered way to use modern portfolio theory to improve investing outcomes. By demonstrating how smart asset choices can create a portfolio that both increases returns and reduced risk relative to more traditional options, he offers an intelligent and data-backed proposal suitable for any investor.
One of the most notable features of the Ideal Index portfolio is its inclusion of small cap growth stocks in the allocation. Combined with a healthy value tilt and a strong international flavor, it’s a good portfolio choice for investors less married to large cap US stocks and more interested in casting a wider net for portfolio returns.
Featured Discussion
Performance
Since 1970, an investor in Australia holding the Ideal Index Portfolio earned an average 5.6% real return, with a baseline CAGR of 3.4% over 15 years. It supported a 3.9% safe withdrawal rate for 30 years and 3.3% indefinitely. Its worst peak-to-trough loss was 46%, and the longest a new investment spent below water was under 14 years.
Ideal Index Portfolio Performance
| # | Metric | What it measures |
|---|---|---|
| 5.6% | Average return | Mean annual return after inflation |
| 3.4% | Baseline real return (15 years) | What 15-year stretches returned in the weaker outcomes |
| 3.9% | Safe withdrawal rate (30 years) | Highest spending rate that lasted 30 years in the worst case |
| 3.3% | Long-term withdrawal rate | The SWR floor over very long retirements |
| 46% | Deepest drawdown | Worst peak-to-trough loss after inflation |
| 14 years | Longest drawdown | Longest a new investment stayed below what you put in |
| 12.2% | Volatility (standard deviation) | Year-to-year variation in returns |
See this portfolio in the Annual Returns, Long Term Returns, Withdrawal Rates, and Drawdowns charts.
Stats for all home countries
Summary Stats by Home Country
| Home country | Average | Baseline | SWR | LTWR | Deepest | Longest | Volatility |
|---|---|---|---|---|---|---|---|
| Australia (aus) | 5.6% | 3.4% | 3.9% | 3.3% | 46% | 14 years | 12.2% |
| Canada (can) | 5.9% | 3.5% | 4.7% | 3.8% | 34% | 10 years | 10.0% |
| France (fra) | 6.7% | 4.2% | 4.2% | 3.7% | 42% | 13 years | 13.5% |
| Germany (deu) | 6.4% | 4.1% | 4.0% | 3.5% | 45% | 14 years | 14.0% |
| Italy (ita) | 6.7% | 3.8% | 4.6% | 3.8% | 34% | 11 years | 13.2% |
| Japan (jpn) | 5.7% | 2.6% | 3.8% | 2.9% | 44% | 13 years | 13.8% |
| Netherlands (nld) | 6.2% | 3.7% | 3.7% | 3.2% | 47% | 14 years | 14.1% |
| Spain (esp) | 5.9% | 3.1% | 3.6% | 3.0% | 47% | 14 years | 14.5% |
| Sweden (swe) | 7.4% | 5.0% | 4.5% | 4.1% | 40% | 13 years | 13.7% |
| Switzerland (che) | 5.7% | 2.8% | 3.2% | 2.6% | 54% | 15 years | 15.8% |
| United Kingdom (gbr) | 6.3% | 4.7% | 4.3% | 3.7% | 37% | 14 years | 12.6% |
| United States (usa) | 6.1% | 3.8% | 4.9% | 3.9% | 36% | 8 years | 11.6% |
To see this portfolio from a specific home country’s perspective, link readers to this page with ?home=COUNTRY added to the URL, using the codes shown in parentheses in the table above (e.g. ?home=aus). The portfolio itself is fixed by the page, so ?pk= has no effect here. More in the Guide for AI Assistants.
Charts
Different ways to visualize the Ideal Index Portfolio
Comparisons
How the Ideal Index Portfolio compares to other options
Alternatives
Portfolios with a similar structure or design intent
Coffeehouse Portfolio — Similar assets, but with less international stocks
Merriman Ultimate — The same basic idea that subdivides international
Larry Portfolio — A shared philosophy with a different allocation approach
Articles
Insights that mention the Ideal Index Portfolio
Discussion
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