Investment Returns By Asset Class – February 2013 Update

Here is my monthly update of the trailing total returns for the major asset classes that I find useful. Passive ETFs are used to represent major asset classes, as they represent actual investments that folks can buy and sell. Return data was taken after market close at the end of January 2013.

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
5.49% 16.85% 4.69% 8.79%
Broad International Stock Market
Vanguard Total International Stock (VXUS)
MSCI All Country World ex USA Investable Market Index
3.35% 13.83% -0.63% 10.20%
Emerging Markets
Vanguard Emerging Markets ETF (VWO)
FTSE Emerging Index
0.61% 7.61% 1.61% 16.36%
REIT (Real Estate)
Vanguard REIT ETF (VNQ)
MSCI US REIT Index
3.72% 14.64% 6.92% 12.40%
Broad US Bond Market
Vanguard Total Bond Market ETF (BND)
Barclays U.S. Aggregate Float Adj. Bond Index
-0.64% 2.47% 5.39% 5.09%
US Treasury Bonds – Short-Term
iShares 1-3 Year Treasury Bond ETF (SHY)
Barclays U.S. 1-3 Year Treasury Bond Index
0.00% 0.19% 1.85% 2.61%
US Treasury Bonds – Long-Term
iShares 20+ Year Treasury Bond ETF (TLT)
Barclays U.S. 20+ Year Treasury Bond Index
-3.86% -0.47% 8.30% 7.36%
TIPS / Inflation-Linked Bonds
iShares TIPS Bond ETF (TIP)
Barclays U.S. TIPS Index
-0.68% 3.72% 5.91% n/a
Gold
SPDR Gold Shares (GLD)
Price of Gold Bullion
-0.01% -4.93% 12.04% n/a

Here is a chart of the 1-year trailing returns for the major asset classes above, which I use to help decide where to invest new funds and for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

February 2013 Trailing 1-year Returns

* Listed are total returns (includes dividends and interest) as calculated by Morningstar as of 1/31/13. All periods longer than one year are annualized. NAV returns are listed, as there is not a significant premium/discount to NAV (except for GLD) 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/VEMAX, VNQ/VGLSX, BND/VBLTX).

Comments

  1. Mary Willis says:

    Thank you for exposing your investment plans and planning and thoughts for the benefit of all of us. I am a 54 year old investment neophyte, and appreciate your information very much!

  2. It’s funny that you compare gold to investments such as stocks, bonds, and real estate. Gold is a saving. It’s a hedge against inflation, and not a speculative investment. Gold just sits there and it should be compared to currencies such as the Dollar, Euro, Yen, etc. It’s the best form of money out there.

  3. LargeTalons says:

    Oh boy, here we go.

    @Zero: It’s funny that you believe gold is money. Gold is a commodity just like wheat, corn, oil, or pork bellies. That makes it fundamentally different than the other investments being compared here, but there is certainly nothing wrong with the comparison, given that a lot of people consider gold to be a reasonable component of their asset allocation. Besides, gold has much less in common with world currencies than even something like a bond fund. The difference here is that the price of gold fluctuates with natural supply and demand, while, on the other hand, the supply of world currencies are manually manipulated to adjust for demand. By the way, I’m not conveying an opinion as to whether that is good or bad, just stating that it is true.

  4. If you truly believe that gold is money, and did so even when gold was heavily out of favor, when even when the UK sold off a huge chunk of their reserve holdings, then more power to you. You may be able to hold on and gain any potential benefit of holding gold.

    Forgive me, but I’ve been around long enough and don’t remember any such talk from everyday people in the early 2000s. I would say that most people holding gold now are only doing so because of the current bull market. As such, most people will be out of gold as soon and there are a few consecutive years of lagging performance (which will happen eventually), leaving them worse off than before. I am wary of being one of those people. If I did own gold, I’d hold it in physical form so at least you get some armageddon protection as well. You now, next to my guns, bullets, and the self-sustaining ecosystem in my backyard.

  5. JimmyRustle says:

    If gold is a “a commodity just like wheat, corn, oil, or pork bellies” how come so many people accept it as a preferred form of currency for barter? 80% of people I trade with for good would take a coin vs the spot value of that coin… The other 20% are usually not in the investment class and need quick money to cover bills.

    Also, why use GLD? Seems almost deceitful being as how gold’s 10 year annualized performance was 33.8%… People have been repeating gold is worthless since 1971 when it was decoupled from the dollar, despite annualized return of over 20% since.
    When there is a government surplus, or the Fed moves prime into the teens then we can talk about selling gold.

    2000 was a dark and ignorant time, only the 4% of the world were internet users. Now 35% of the world has access to the internet. The cat’s pretty much out of the bag on the giant scam that is central banking…

  6. @Mary Willis – You’re welcome!

    @JimmyRustle – What exactly are you bartering in exchange for gold coins?

    “2000 was a dark and ignorant time” – Actually, my theory is that without the ease of buying gold via ETF, gold prices would not be nearly as high as they are today.

  7. LargeTalons says:

    @JimmyRustle – Take a look at these charts, inflation adjusted values of gold, copper, and housing. They all seem to look like charts of commodities to me. The values go up, the values go down. I certainly don’t see any steady return of 20% annualized. Say you bought gold in 1980 and sold in 2000, you could have had a big fat return of -270%. Gold is anything but the rock solid store of value that the bugs might have you believe it is. So, your theory is that since 2000, when everyone suddenly became enlightened to the inherent fallacy of monetary policy, gold prices will rise forever because people now realize its the only “real money”. I remember when Alan Greenspan was testifying in congress making a very similar argument about modern financial instruments as it relates to the price of my condo. We all know how “wise” that was now.

  8. LargeTalons says:
  9. JimmyRustle says:

    @Jonathan: Any higher value items: tools, vehicles, services, real estate.

    @LargeTalons: First, congrats; you’ve discovered curve fitting now. IE: cherry picking highs and lows on a HISTORICAL chart for extreme examples.
    Here let me try… Ahem, say you bought SP500 in 2000 and sold in 2009 you’d have a big fat return of -45%. Stocks are a scam!!!!1
    See how stupid that is?

    Second, you didn’t link any charts, but I’m sure everything looks the same last 12 years as the dollar (your “store of value” :) has mostly tanked… You seem angry that gold fluctuates in value? I’ve got news for you; everything on the planet does. $1 today, is not $1 tomorrow as I hoped you have learned by now.

    Last, it is you with the crazy bias, not me. I invest in gold in a permanent portfolio way… So I guess by your logic I am also a US dollar bug… And a stock bug. And a long term bond bug.

  10. LargeTalons says:

    @JimmyRustle – Your original question was why would people accept gold to barter if it were a commodity. What does that have to do with whether or not it is a commodity? People can barter plumbing services for milk if they wanted too as well, that doesn’t mean milk can be defined as money. Is your point that people don’t depend on the spot value in dollars of gold when they are trading it? I don’t understand your argument.

    It was you who first cherry picked the dates of 1971 and now for your stated 20% return. The point is exactly that the price fluctuates. I never said gold was worthless, but nor is there any evidence that gold will continue to deliver a 20% return indefinitely. Again, the point is that investing in gold is no different than investing in copper, or silver, or soybeans, or sand, or oil… they are all the same type of investment.

    My entire point is merely that gold has nothing to do with world currency. That ended in 1971 as you pointed out. Obviously the value has increased against the dollar because the dollar decreases in value on purpose, that is how it is designed to work. When the value of the dollar rises, its called deflation, and it causes recessions. Again, the supply of currency is adjusted to fit demand, which makes it a completely and utterly different thing than a commodity. The whole point of currency is to have a means of exchange that is outside the realm of supply and demand.

  11. JimmyRustle says:

    Yes, I can see that you do not understand… You can walk out on the street and ask who wants your milk. Most likely no one. Now see who wants your gold.

    Let’s use science to refute your claims that old milk is equal to gold… Gold has been the currency of man since the dawn of civilization. And logically so:
    http://www.npr.org/blogs/money/2011/11/10/142209900/video-why-gold

    You can continue to yell from the mountain tops that gold is the same as corn or milk, but you’re going against innumerate intelligent humans in history that thought otherwise.

    1971 is not cherry picked, it is the date that the dollar fully decoupled from the US dollar, before that it was redeemable in gold.

    Gold is money. Unlike your rotten milk, I can go to any country in the world and exchange it for items of value… I can go to corners of the world where they wouldn’t recognize dollars but they would know gold.

    In dark and ignorant times many forget this and are often punished for trusting in paper… Maybe you should go down to Argentina and see how well this “supply of currency” you’re talking about works before it dies and people revert to real money.

  12. Gold has been money for thousands of years, until only in 1971 former president Nixon took it off the gold standard. The reason it’s real money because it holds its value, easily divisible, and has a high value to weight ratio. This makes it a very good medium of exchange. The world will return to using gold as money again (but not physically exchanging it like in the past) once the dollar collapses which I think will happen within a few years. It’ll be more electronic wise this time. Gold would be money right now, but the government makes it illegal to use it as a medium of exchange. However, I think market forces will always overcome government decree in the end.

    Also, I do not see a bubble in gold/silver. I see a huge bubble in the Dollar and the bond market.

  13. I do agree that a lot of people hold gold because of speculation of the gold bull market (which I think will last for at least another decade). However, most people hold gold because it preserves their value. It protects you from the government printing money. Gold is more like a ‘savings’ than an investment. I would recommend you to look up Peter Schiff, whom understood the Dotcom bubble, predicted the Housing bubble, predicting the soon Dollar bubble.

  14. Great comparison Jonathan! I think you should add the VGPMX (Vanguard Precious Metals and Mining Fund) as a comparison since there are a lot of funds here. It’s funny that gold did better than all the other investments in the last 5 years even though nothing is produced or comes out from holding gold.

  15. Why you prefer ETFs over index funds?

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