Tyler’s Pinwheel Portfolio: Allocations, Performance, and Returns Analysis
Tyler’s Pinwheel Portfolio is a passive index portfolio that aims to diversify investments across stocks, REITs, bonds, gold and cash.
The Pinwheel Portfolio strategy can be implemented with 8 ETFs. You do not need to pick individual stocks, bonds, REITs, gold and cash.
According to our backtests over the past 16 years, the The Pinwheel Portfolio has the following performance metrics:
- Compound annual return (CAR): 4.95%;
- Standard deviation: 15.22%;
- Maximum drawdown (MDD): -40.77%;
- Sharpe ratio (with a risk-free rate of 3%): 0.13;
- CAR/MDD ratio: 0.12.
Who Is Tyler
Tyler is an anonymous person who claims the following about himself:
I’m a mechanical engineer with a strong math education, a deep personal interest in finance and investing, and some nifty Excel skills I’ve picked up along the way. I also have a tendency to look at data a little differently than others and a somewhat unique background in design and consulting that helps me think creatively and communicate complex ideas reasonably effectively. Mix it all together, and that’s a pretty decent recipe for some new financial tools and a fresh take on investing.
I write under the pen name Tyler because:
1. I value my privacy more than any potential name recognition, and
2. I don’t want you to believe me simply because of who I am. I prefer to show my work and earn trust through good data.
What Is The Pinwheel Portfolio
The Pinwheel Portfolio consists of the following asset classes with their respective total weights:
| Asset class | Weight in the portfolio |
| Stocks | 50.00% |
| Bonds | 15.00% |
| REITs | 15.00% |
| Gold | 10.00% |
| Cash | 10.00% |
The more detailed allocation of the Pinwheel Portfolio assets with appropriate weights is like this:
| Asset Allocation | Weight |
| Total U.S. Stock Market Stocks | 15.00% |
| U.S. Small Cap Value Stocks | 10.00% |
| Total International Stock Market | 15.00% |
| Emerging Markets Stocks | 10.00% |
| Intermediate Bonds | 15.00% |
| Cash | 10.00% |
| REITs | 15.00% |
| Gold | 10.00% |
Stocks In The Pinwheel Portfolio
Stocks are used as high-return securities that increase portfolio returns, but stocks are more risky and volatile than bonds. The Pinwheel Portfolio includes the following types of stocks:
- Total U.S. Stock Market Stocks – US large-cap growth and value stocks that virtually replicate the benchmark S&P 500 stock index;
- U.S. Small Cap Value Stocks – US small cap value stocks These stocks have historically outperformed growth stocks and large cap stocks;
- Total International Stock Market – international stocks allow you to increase diversification by reducing the overall correlation of the portfolio. International stocks are located on other continents (Europe, Asia, etc) and have low correlation with US stocks;
- Emerging Markets Stocks – these stock markets are more risky but typically outperforms developed stock markets in terms of growth.
For stocks, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:
| Portfolio Sector | ETF Name | ETF Ticker |
| Total U.S. Stock Market Stocks | SPDR S&P 500 ETF Trust | SPY |
| U.S. Small Cap Value Stocks | iShares Russell 2000 Value ETF | IWN |
| Total International Stock Market | iShares MSCI EAFE ETF | EFA |
| Emerging Markets Stocks | iShares MSCI Emerging Markets ETF | EEM |
Bonds In The Pinwheel Portfolio
Bonds are used in the portfolio as low-risk, low-volatility securities that reduce the portfolio’s return but also reduce the maximum drawdown. The Pinwheel Portfolio includes the following types of bonds:
- Intermediate Bonds – medium-term US treasury bonds that are highly reliable;
- Cash – ultra short-term treasury bonds that are highly reliable and, in fact, are a cash equivalent;
For bonds, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:
| Portfolio Sector | ETF Name | ETF Ticker |
| Intermediate Bonds | SPDR Portfolio Intermediate Term Treasury ETF | SPTI |
| Cash | iShares Short Treasury Bond ETF | SHV |
REITs In The Pinwheel Portfolio
Real estate investment trust (REIT) stocks historically have a low correlation with the traditional stocks, such as S&P 500 stock index.
For REITs, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:
| Portfolio Sector | ETF Name | ETF Ticker |
| REITs | iShares U.S. Real Estate ETF | IYR |
Gold In The Pinwheel Portfolio
Gold is a precious metal that historically has a low correlation with the stock and bond markets and acts as a “safe haven” for investors.
For gold, we have picked GLD, and have very high liquidity and a decent performance history:
| Portfolio Sector | ETF Name | ETF Ticker |
| Gold | SPDR Gold Shares | GLD |
Backtesting Tyler’s Pinwheel Portfolio
We backtested the Pinwheel Portfolio using a “buy and hold” strategy with rebalancing at the beginning of each year. For backtesting, we used the ETFs we picked with the appropriate weights. Backtesting interval is from 2007 to 2023.
Portfolio equity curve:
Portfolio underwater curve (drawdowns):
The Pinwheel Portfolio’s return and performance monthly and annually are summarized in this table:
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Yr% |
| 2007 | 2.2% | -1.0% | 0.8% | 2.0% | 1.6% | -1.6% | -2.5% | 1.3% | 4.4% | 3.3% | -4.0% | -0.7% | 5.6% |
| 2008 | -1.8% | -0.5% | -0.3% | 2.9% | 1.1% | -5.6% | -0.4% | -1.0% | -4.1% | -15.7% | -4.2% | 5.3% | -23.1% |
| 2009 | -7.8% | -7.6% | 5.1% | 9.1% | 6.0% | -1.5% | 6.8% | 3.6% | 4.4% | -2.1% | 5.3% | 1.5% | 23.3% |
| 2010 | -3.0% | 2.3% | 4.8% | 2.2% | -5.0% | -2.4% | 5.2% | -1.7% | 6.1% | 2.9% | -0.8% | 4.5% | 15.4% |
| 2011 | 0.2% | 2.8% | 0.3% | 3.5% | -0.8% | -1.5% | -0.0% | -3.1% | -8.1% | 8.1% | -0.9% | -1.0% | -1.2% |
| 2012 | 5.4% | 1.6% | 1.0% | -0.2% | -5.5% | 3.7% | 0.6% | 1.8% | 1.9% | -0.7% | 0.6% | 2.1% | 12.4% |
| 2013 | 2.5% | -0.4% | 1.7% | 1.4% | -2.0% | -2.5% | 3.1% | -2.2% | 3.3% | 2.6% | -0.1% | 0.8% | 8.2% |
| 2014 | -1.7% | 3.7% | 0.2% | 0.7% | 1.2% | 1.9% | -1.5% | 2.0% | -3.9% | 2.3% | 0.7% | -0.5% | 5.2% |
| 2015 | 1.2% | 1.5% | -0.4% | 0.4% | -0.1% | -1.9% | -0.2% | -4.0% | -1.5% | 4.5% | -0.7% | -1.3% | -2.9% |
| 2016 | -2.7% | 0.6% | 5.4% | 0.9% | -0.4% | 2.3% | 3.0% | -0.5% | 0.4% | -2.1% | -0.3% | 1.6% | 8.3% |
| 2017 | 2.0% | 2.1% | 0.6% | 1.1% | 0.8% | 0.6% | 1.9% | 0.7% | 0.8% | 0.9% | 1.2% | 0.9% | 14.4% |
| 2018 | 2.3% | -3.6% | 0.3% | 0.1% | 0.9% | -0.3% | 1.4% | 0.4% | -0.7% | -4.2% | 1.9% | -4.1% | -5.8% |
| 2019 | 6.4% | 1.2% | 1.0% | 1.6% | -2.9% | 4.3% | 0.1% | 0.2% | 1.3% | 1.9% | 0.4% | 2.5% | 19.2% |
| 2020 | -0.5% | -4.5% | -10.0% | 6.3% | 2.6% | 2.3% | 4.1% | 2.4% | -2.2% | -1.0% | 6.6% | 3.9% | 8.9% |
| 2021 | 0.2% | 1.4% | 2.2% | 3.2% | 2.0% | -0.1% | 0.6% | 1.4% | -3.2% | 3.4% | -2.0% | 3.9% | 13.8% |
| 2022 | -3.5% | -1.3% | 1.1% | -4.8% | -0.4% | -5.2% | 4.1% | -3.5% | -7.3% | 3.1% | 6.4% | -2.4% | -13.8% |
| 2023 | 6.6% | -3.6% | 1.6% | 0.7% | -0.5% | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 4.7% |
Portfolio performance statistics compared to the benchmark S&P 500 Total Return index:
| Statistical Metric | Portfolio | S&P 500 TR |
| Annual Return % | 4.95% | 8.84% |
| Exposure % | 99.22% | 100.00% |
| Risk Adjusted Return % | 4.99% | 8.84% |
| Max. drawdown | -40.77% | -55.19% |
| CAR/MaxDD | 0.12 | 0.16 |
| Standard Deviation | 15.22% | 22.64% |
| Sharpe Ratio (3% risk-free) | 0.13 | 0.26 |
Conclusion On The Pinwheel Portfolio
The Pinwheel Portfolio lost out to the S&P 500 TR in terms of returns, but outperformed in terms of risk.
The drawdown and standard deviation of the portfolio is slightly lower than that of the S&P 500 TR index, because a significant portion of the portfolio (50%) are non-stock ETFs with lower returns.
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FAQ:
What is Tyler’s Pinwheel Portfolio, and how does it differ from other investment strategies?
Tyler’s Pinwheel Portfolio is a passive index portfolio designed for diversified investments across various asset classes, including stocks, REITs, bonds, gold, and cash. It differs from other strategies as it utilizes a mix of Exchange-Traded Funds (ETFs) without the need to pick individual stocks, aiming for a balanced and diversified approach.
Who is Tyler, and why does he write under a pen name?
Tyler is an anonymous individual with a background in mechanical engineering, strong math education, and a keen interest in finance and investing. He chooses to write under a pen name to prioritize privacy over name recognition and prefers to earn trust through providing reliable data and information.
How are stocks selected for the Pinwheel Portfolio, and what types of stocks are included?
The portfolio includes various types of stocks, such as U.S. large-cap growth and value stocks, U.S. small-cap value stocks, total international stocks, and emerging market stocks. ETFs like SPDR S&P 500 ETF Trust (SPY) and iShares MSCI Emerging Markets ETF (EEM) are chosen for their diversification, liquidity, and historical performance.