Major Asset Class 1, 3, 5, 10 & 15 Year Returns

As you select asset classes and class weights for your portfolio, you should take into consideration, among other things, the mean return of those classes over different periods of time.

History is no guarantee of the future, but lack of understanding of the past may result surprising returns. It’s a good idea to do all you can to minimize surprises.

The chart shows the relative 1, 3, 5 10 and 15 year annualized returns for six major asset classes. The key feature to observe is the relative size of the return for each class within each year.

You can see bonds as a low return, but stabilizing asset class. You can see the US market has been weak relative to foreign markets. Commodities have been strong. Real estate did well, until it fell out out bed in a major way during the last 12 months.

A representative (but not exhaustive) list of index funds for those classes is:

• US Total Stocks: VTI, IWV and IYY
• Foreign Developed Market Stocks: EFA
• Foreign Emerging Market Stocks: EEM and VWO
• US REITs: VNQ and IYR
• Global Commodities: GSG and DJP
• US Aggregate Bonds: AGG and BND

Comments

[AJ30]

This is an amazing study, and very well presented. Thank you. Have you done the same study for major classes of Commodites such as Gold, Siver, Copper or Coal or Fertilizer? If so please share.

[Richard Shaw]

AJ30

No I have not studied separate commodities in this way yet, but I will put that sub-category study into my list of future studies. Some will be easier than others to gather information. HIstory for majors like gold and oil is easy, but minors may not be so easy to find.

Thanks.

Richard

[Kyrriana]

There is a very good website at www.assetcorrelation.c... which shows the correlation between the various asset classes using many of the representative ETF's that you mentioned. It currently calculates the correlation for the past 90 days but hopefully they'll add more time periods soon because it would be interesting to see the correlation over the past decade.