Warren Buffett has repeatedly noted that it is hardly possible for an investor to consistently outperform an index. Even the best-performing products, after paying bank fees and service charges, make it impossible for the client's assets to grow even at the level of the index. On one hand, the investment manager must significantly beat the index; on the other hand, they must provide the product's service providers (bank, depository, auditor, etc.) with the 2-3% per annum of client assets necessary for their business. On this site, we often discuss how IskraIndex allows you to avoid these expenses when investing independently using our model portfolios. Let's now turn to the question of portfolio quality.

The IskraIndex: Deposit+ Balanced portfolio is constructed as a risk-neutral product and in terms of its historical drawdown and other risk metrics, it corresponds quite well to medium-risk portfolios. However, as it turns out, its return practically matches the average annual return of the S&P 500 index.

A few comments. The average annual return of the IskraIndex portfolio turned out to be slightly lower: 15.9% vs. 16.0%. But the most interesting part is comparing the two portfolios from a risk perspective. Even visually, the insane volatility of the S&P index relative to the Deposit+ portfolio is striking. During the comparison period, the S&P index experienced three instances where it fell by more than 17%, once dropping by 30%. The IskraIndex portfolio experienced a maximum decline of 10%. All this leads to the Sharpe ratio, which determines the amount of return premium (relative to the risk-free rate) per unit of risk, being almost three times as high for the IskraIndex portfolio: 1.6 vs. 0.6.

How difficult is it to create and maintain such a portfolio? The most important thing required from the investor is to carefully rebalance their portfolio once a month in accordance with the model. If the investor's portfolio is sufficiently large (more than $5 million), the costs for the IskraIndex service will be negligible, and it is this precise, systematic rebalancing that will allow them not to underperform the S&P 500 index and feel an order of magnitude more confident and calm than passive investors in the American index.

An interesting opportunity also opens up for aggressive investors: leveraging the portfolio (which brokers will gladly do for the largest IskraIndex ETFs) will allow creating a portfolio with a risk level comparable to the S&P index, whose expected return could increase up to 60-70% compared to the index.