Now that our portfolio size has become more significant, I want to keep on top of things better while still avoiding most of the market noise. I took some ideas from how others share investment return data (see here and my 2011 year-end returns post) and will try each month to update the trailing total returns for the major asset classes that I find useful. I am using passive ETFs to track asset classes, as they represent “real” investments that you can buy and sell.
| Asset Class Representative ETF Benchmark Index |
1-Mo | 1-Year | 5-Year | 10-Year |
| Broad US Stock Market Vanguard Total Stock Market (VTI) MSCI US Broad Market Index |
2.52% | 17.13% | 1.77% | 7.31% |
| Broad International Stock Market Vanguard Total International Stock (VXUS) MSCI All Country World ex USA Investable Market Index |
2.74% | -2.25% | -4.01% | 7.80% |
| Emerging Markets Vanguard Emerging Markets ETF (VWO) MSCI Emerging Markets Index |
0.45% | -6.18% | -0.73 | 14.68 |
| REIT (Real Estate) Vanguard REIT ETF (VNQ) MSCI US REIT Index |
-0.10% | 20.04% | 3.92% | 11.22% |
| Broad US Bond Market Vanguard Total Bond Market ETF (BND) Barclays U.S. Aggregate Float Adj. Bond Index |
0.10% | 5.90% | 6.66% | 5.46% |
| US Treasury Bonds – Short-Term iShares 1-3 Year Treasury Bond ETF (SHY) Barclays U.S. 1-3 Year Treasury Bond Index |
0.00% | 0.28% | 2.82% | 2.77% |
| US Treasury Bonds – Long-Term iShares 20+ Year Treasury Bond ETF (TLT) Barclays U.S. 20+ Year Treasury Bond Index |
-1.31% | 22.02%% | 11.78% | 8.54% |
| TIPS / Inflation-Linked Bonds iShares TIPS Bond ETF (TIP) Barclays U.S. TIPS Index |
-0.31% | 8.10% | 7.96% | n/a |
| Gold SPDR Gold Shares (GLD) Price of Gold Bullion |
4.94% | -7.60% | 19.81% | n/a |
In addition, for relative comparison, I’ll update a chart each month comparing the 1-year trailing returns of the major asset classes. This should be useful in determining which areas I should be rebalancing my asset allocation. Instead of performance-chasing, I’ll be buying more of the worst-performing asset classes. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for more details.
Listed are total returns (includes dividends and interest) as calculated by Morningstar as of 8/31/12. All periods longer than one year are annualized. NAV returns are listed except in the case of GLD, as there is not a significant premium/discount to NAV for the other ETFs and the NAV returns match the equivalent Vanguard mutual fund returns. In certain cases, I am using the long-term returns of the equivalent Vanguard mutual funds as Vanguard ETFs are simply a different share class of the mutual funds, share the same underlying investments (VXUS/VTIAX, VWO/VEIEX, VNQ/VGLSX, BND/VBLTX).
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Great idea, Jonathan! I’ve been doing my own version of this from time to time the last year or so, but now I know I can be a little lazier and refer to your monthly update with the nice chart. 🙂
TIPS has been returning 8% / year ? I didnt realize inflation was that high. Can someone please explain the correlation between TIPS and actual inflation.
@Hal – TIPS pay a real yield above CPI inflation. As that real yield as determined by the market drops, the value of TIPS goes up, similar to what happens with nominal bonds. For example, long treasuries don’t yield 20%, the rates on them just dropped and the effect magnified by the long duration. Real yields have been dropping significantly over the past few years.
@Dan – Thanks, I’m glad you find it useful 🙂
Hal, just like nominal bonds increase in price when the rate goes down (and decrease when the price rises), so do TIPS increase in price when the REAL rate decreases. Real rates have been going down steadily for some time, with the 5- and 10-year TIPS actually yielding a negative real yield.
Interesting. I kept hearing investors are getting hammered with their their 2 yr or 10yr tips. On the other side this fund returns the price as opposed to the yield so it does make sense to buy as the feds fund rate will be kept artifically low for a while…damn. i miss the train