Robustness of Asset Allocation Strategies in Long-Term Investing: A Comparative Analysis of Selected Portfolio Approaches

Abstract

This paper examines the robustness of selected asset allocation strategies in the context of long-term investing. The study compares the performance and risk characteristics of four portfolio construction approaches – the 1/N portfolio, the 60/40 portfolio, the annually rebalanced Markowitz portfolio (MW+R) and a portfolio with weights directly proportional to asset volatility (SD) – over 10- and 20-year investment horizons. The empirical analysis is based on weekly data for nine exchange-traded funds representing different asset classes over the period 2009–2025. Historical backtesting is complemented by Monte Carlo simulations employing a bootstrap approach to evaluate the stability and resilience of the strategies under alternative market scenarios. The results show that no single strategy dominated in all indicators: the SD portfolio achieved the highest returns, whereas the constrained Markowitz portfolio provided the most favourable risk-adjusted performance and ranked first in the composite robustness assessment in all simulation scenarios and at both horizons, while the 1/N strategy remained a competitive simple alternative. The study thus contributes to the literature on long-term portfolio management by comparing simple allocation rules with optimization-based approaches and provides practical implications for strategic asset allocation in dynamically changing financial markets.