It is easy to say that a strategy works. It is harder to show it. A model portfolio does exactly that: it follows fixed rules over time, and every decision is recorded. That lets you see how a strategy has actually performed, through both good and bad periods, instead of relying on anecdotes.
What is a model portfolio?
A model portfolio on AksjeNet is defined by:
| Element | What it means |
|---|---|
| Investment universe | Which shares the model can choose from, for example Oslo Børs |
| Risk profile | How much risk the model takes, from low to high |
| Selection model | The rules for which shares are bought and sold |
| Rebalancing rule | How often and how the portfolio is adjusted |
| Benchmark | The index the model is compared with |
At each run, the model reassesses its holdings. It may keep, increase, reduce, buy or sell positions, according to its rules.
What you can see
- The holdings and how much each share makes up of the portfolio.
- The transaction history, with every purchase and sale the model has made.
- The run history, showing how the portfolio has changed over time.
- The return compared with the benchmark index.
Because everything is visible, you can verify the results and see how the model has behaved in different markets.
How to read the returns
Return and excess return
The return shows how much the portfolio has risen or fallen since inception. The excess, or relative, return shows the difference against the benchmark. A model that rose 20 per cent while the index rose 25 per cent has done worse than the market, even though its return is positive.
Gross and before tax
Returns on the model portfolios are shown gross and before tax. Personal tax, your own trading costs and other actual costs are not deducted. Your own return with the same strategy will therefore normally be somewhat lower.
The benchmark
The Norwegian models are compared with OSEAX, which covers all shares on Oslo Børs. The index is a comparison, not an alternative with identical risk. Differences in cash weight, dividend treatment and start date can affect the comparison.
How to use the model portfolios
- As inspiration. See which shares a rules-based strategy picks, and use them as a starting point for your own analysis.
- As a comparison. Compare your own portfolio with a model of similar risk.
- To learn. Follow how the model rebalances, and see how rules can replace gut feeling.
If you want to follow a model yourself, remember that timing, brokerage, tax and the amount you invest will make your result differ from the model’s.