In previous posts, we have looked at returns over the last 20 years for parts of the capital markets including international, growth, value, fixed income etc. as provided by Blackrock.
The value of the Blackrock data is it provides long term results, shows volatility explicitly, and illustrates the value of diversification.
The following table extends these results by showing year-to-date returns on the sectors of the diversified portfolio: Click to Enlarge.
The table shows the volatility of various sectors and the dampening influence on returns that results from diversification.
For the year-to-date period, the international sector has had the greatest underperformance at -13.14% followed by growth stocks at -7.71%. Bonds have played an heroic role achieving a return of +5.24%.
Overall, the portfolio is down -3.1% calculated as follows:
.3* 1.0524 + .11 * .8686 + .11 * .988 + .24 * .9229 + .24 * .9483 = .969 and
.968 - 1 = -.031
The returns are based on net asset value as reported by Morningstar.
To me, a benefit of simplifying and using exchange traded funds is the ability to easily track performance on an ongoing basis. Also, by playing with the numbers, it is easy to see the impact of altering the allocation by, say, moving 5% from international to bonds.
Disclaimer: the information here is intended solely for instructional purposes. Investors should consult an advisor or do their own research before investing. I hold some of the exchange traded funds mentioned.
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