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Tuesday, October 1, 2013

Year-to-Date Performance - 9/30/2013

My favorite investment chart is the BlackRock 20-year sector performance.  It details the relative ranking of asset classes on an annual basis as well as the performance of an easily replicated low-cost diversified portfolio comprised of 65% stocks, 35% bonds.  The diversified portfolio returned 12.2% over the 12 months ended 12/31/2012 and 7.9% on an average annualized basis over the past 20 years.

The diversified portfolio allocation is an appropriate benchmark for individuals in their 40s and even early 50s, depending on risk tolerance.  The table contains sufficient data, however, to construct a benchmark for any specific allocation; and, in fact, the allocation can be changed over time--as it should be as the individual ages.

Voluminous data from unbiased academic studies have been presented over the years showing that a diversified portfolio of low-cost funds outperforms upwards of 70% of active managers over the longer term after all costs are taken into account.  These studies cover various time periods, countries, asset classes, and investment methodologies.  In line with this data, the low-cost diversified approach warrants consideration as a benchmark for investors.  It shouldn't go unnoticed that the approach economizes on the investor's time.

Here is an update showing the approximate performance of the diversified portfolio for the 1st nine months of 2013:



Weight
Fund
Return (%) 9 months ended 9/30/2013
Expense Ratio
35
AGG  (Barclay’s Aggregate Bond Index)
-2.00
.08
10
EFA (EAFE Index)
14.46
.34
10
IWM (Russell 2000)
27.69
.24
22.5
IWF (Russell 1000 Growth)
20.68
.20
22.5
IWD (Russell 3000)
20.19
.21
 
The overall return of the diversified portfolio was approximately +13.06% over the first 9 months of the year.

Disclosure:  This post is intended for educational purposes only.  Past performance is not indicative of future performance.  Individuals should consult a professional or do their own research before making investment decisions.


3 comments:

  1. It sounds like an interesting series. I will check it out

    book publicist

    ReplyDelete
  2. Experts cautioned investors due to prolonging US shutdown, as industry bodies have started raising their concern that it is bound to hit Indian exports because disabling trade facility at ports.
    Stock tips for 03-OCT-2013 Thursday

    ReplyDelete
  3. Not a bad return for buying dumb index funds and keeping the portfolio very simple. Bravo.

    ReplyDelete