Now that we have analyzed all the above assets, the time has come to present to you our total portfolio. As we have said, we adhere to a long-term Value strategy. Such a method seems to us as one of the most successful. Mention why we chose this strategy:Source: Antti Ilmanen “Expected Return” On this chart you can see the performance of value-strategy in times of major economic recessions: maintain a positive growth or decline with much less force. The best result strategy showed during the dotcom boom. In the long term it makes sense to choose the shares of value-principle - now there is a wave of market price growth, especially in the financial and IT-companies. Below is a graph P/E dynamics on the index S&P500, compiled by Robert Shiller.Source: Robert Shiller, businessinsider.com In mid-October release of the U.S. Federal Reserve acknowledged that economy activity in the U.S. is expanding at a moderate pace, driven by improvement in the housing sector and a recovering labor market despite the slowdown in job growth. Moreover, the release highlighted that an interest rate hike in the end of December might be in the cards. Further, according to recent data from Nielsen, consumer confidence in the U.S. increased by a record 18% during the third quarter. In addition, technology and consumer goods stocks are predicted to perform well in the near term, given the approaching Christmas and January effect. These positive factors have lately driven the benchmark indices higher, and the trend is likely to continue in the near term as well. And the Dow Jones Industrial Average index has gained 7% over the last month, while the S&P 500 index and NASDAQ have gained 6.3% and 7.5%, respectively, during the same timeframe. We chose the 9 value-shares, both standard and original. To determine the balance of shares in the portfolio, we use the modified theory of Harry Markowitz and software package R. Stock Walmart Darden Restaurants AT&T Nvidia Wells Fargo Colgate-Palmolive Tyson Foods Molson Coors Procter & Gamble Weight 5,00% 9,00% 25,00% 4,00% 0,50% 33,00% 17,00% 6,00% 0,50% Average Monthly Return 0,47% 1,22% 0,84% 1,76% 1,50% 1,05% 2,20% 1,22% 0,65% Standart Error 4,55% 6,57% 4,11% 11,73% 8,62% 3,78% 7,51% 5,92% 4,14% Sharpe Ratio 10,35% 18,58% 20,55% 15,04% 17,37% 27,84% 29,31% 20,64% 15,62% We do not include treasury bonds directly in our portfolio (and not consider short position), but the investor can do it yourself using the tangent portfolio. The historical treasuries yield that the risk-free rate is now hovering around 0. The graph below presents monthly return of our portfolio over the period since 2013. Note that the yield is positive most of the time, however, we note that in terms of our value-approach, probably analysis of previous values that most would be appropriate in the momentum strategy. Now from all backgrounds we can make the best portfolio- for maximum yield with minimum risk. We start form the frontier of efficient portfolios out of 9 assets with different return and risk. Then we calculate the tangent portfolio, that is, the portfolio with the highest Sharpe ratio. In our case, Sharp Ratio is 0.398, ie, almost 0.4, which is not bad for a portfolio of 9 shares. Other important factors are as follows: 0.01214 - expected return, 0.03052 - standard deviation. On the pie chart below all portfolio weights are shown. More than the half of portfolio consists of the least volatile stock - Colgate-Palmolive (one-third of the portfolio) and AT&T (a quarter of the portfolio), Tyson Food - stock with the highest yield accounts for almost one-fifth of portfolio. The lowest yield Walmart both with Wells Fargo are presented at portfolio with the lowest weight equals to the half of the percent. The highest risk - Nvidia’s weight is only 1/25 of portfolio. What distinguishes the well-diversified portfolio of one share - a low or even negative correlation between assets. Since we only available market of ordinary shares, the negative correlation is very difficult to achieve. But the correlation among our assets indeed very low, from 0.1 to 0.6 (shown in the chart below) and the problems of one company is not strongly reduce the return of the portfolio. Thisis certainly due to the fact that the portfolio includes the industry with low dependence on each other. Let us remind you that the industry included in our portfolio, along with the base - consumer goods, are: energy; technology, financial; services; automotive. In the end of our portfolio overview we want to take into account portfolio beta which is equal to 0,4723. Thus, the beta of our portfolio is much lower than the "market average" 1, which means portfolio is less suffering from systemic risk. According to the conclusions of the article Betting Against Beta: portfolios with beta less than 1 and the use of leverage show themselves better in the long run.