Portfolio Asset Class Returns, 2022 Year-End Review

Happy New Year! I enjoyed a little winter nap. This worked out fine as successful investing does not require constant attention. To be honest, if all my research and/or experience showed that lot of trading activity led to greater returns, I’d probably be happily trading away right now. But the opposite is closer to the truth, which means I have to make up rules to keep myself from unnecessary action. Here is the obligatory Warren Buffett quote:

Benign neglect, bordering on sloth, remains the hallmark of our investment process.

I used to login to look at my portfolio daily. Then I switched to tracking monthly returns on my low-cost index fund holdings across various asset classes. Now, I only rebalance with incoming cashflows based on my quarterly portfolio updates, and only check my official performance numbers and make major adjustments (selling something) at most once a year. Per Morningstar, here are the annual returns for select asset classes as benchmarked by popular ETFs after market close 12/30/22.

Commentary. Unlike years like 2020 and 2021 where nearly everything went up, 2022 was a year when nearly everything went down. Considering how high inflation was as well, there really was no place to hide.

The “set and forget” Vanguard Target Retirement 2055 fund (roughly 90% diversified stocks and 10% bonds) was down 17.5% in 2022, the biggest loss since the Financial Crisis in 2008. Still, if you have been a steady investor over the past several years, your average return over that span certainly isn’t horrible:

In my mind, this was one of those “inevitable” years. Sooner or later, all that money being pumped into the economy was going to lead to inflation. I had no idea it would be this year, but it was. As such, nobody can predict what 2023 will hold. I still like what I own overall. I just have to make sure our financial position allows us to survive any short-term panics in order to stay invested for the long-term.