The diversified portfolio allocation is an appropriate benchmark for many individuals in their 40s and even early 50s, depending on their specific risk tolerance. The chart contains sufficient data, however, to construct a benchmark and analyze performance for any specific allocation; and, in fact, the allocation can be changed over time using the data in the table--as it should be as an 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.
Below is an update showing the approximate performance of the diversified portfolio's sectors for the 6 months ended 6/30/2015. Overall, the portfolio returned approximately 1.68%, down slightly from the 2.17% reported for the first calendar quarter.
For the 6-month period, sector performance was mixed with the international (EFA) doing best and large and mid-sized value (IWD) lagging. The bond market (AGG) had a negative return as yields increased over the 6 months.
Weight (%)
|
Fund
|
Return (%) 6 months ended 6/30/2015
|
35
|
AGG (Barclay’s Aggregate Bond Index)
|
-0.34
|
10
|
EFA
(EAFE Index)
|
6.12 |
10
|
IWM (Russell 2000)
|
4.71
|
22.5
|
IWF
(Russell 1000 Growth)
|
3.90
|
22.5
|
IWD (Russell 1000 Value)
|
-0.70
|
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.
