Investment Returns By Asset Class – 2012 Annual Returns, Year-End Update

Happy New Year! 2012 has come to an end, which makes this monthly update into an annual wrap-up of the trailing total returns for selected asset classes. 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 December 2012.

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
1.23% 16.41% 2.29% 7.94%
Broad International Stock Market
Vanguard Total International Stock (VXUS)
MSCI All Country World ex USA Investable Market Index
4.19% 18.23% -3.03% 9.41%
Emerging Markets
Vanguard Emerging Markets ETF (VWO)
MSCI Emerging Markets Index
5.88% 18.84% -0.87% 16.20%
REIT (Real Estate)
Vanguard REIT ETF (VNQ)
MSCI US REIT Index
3.72% 17.67% 6.07% 11.68%
Broad US Bond Market
Vanguard Total Bond Market ETF (BND)
Barclays U.S. Aggregate Float Adj. Bond Index
-0.21% 4.04% 5.89% 5.17%
US Treasury Bonds – Short-Term
iShares 1-3 Year Treasury Bond ETF (SHY)
Barclays U.S. 1-3 Year Treasury Bond Index
0.02% 0.31% 2.20% 2.61%
US Treasury Bonds – Long-Term
iShares 20+ Year Treasury Bond ETF (TLT)
Barclays U.S. 20+ Year Treasury Bond Index
-2.16% 3.25% 9.60% 7.75%
TIPS / Inflation-Linked Bonds
iShares TIPS Bond ETF (TIP)
Barclays U.S. TIPS Index
-0.64% 6.80% 6.89% n/a
Gold
SPDR Gold Shares (GLD)
Price of Gold Bullion
-2.43% 6.60% 14.46% n/a

Here is a chart of the 1-year trailing returns for the major asset classes above (also 2012 total annual returns), 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.

2012 Total Annual Returns

Every single asset class ended up in the green, with equities overall having a very strong year despite lots of continued uncertainty. I haven’t bothered to look, but I remember most forecasts from this time last year predicting a “sideways” market. I see 2012 as another year where it was helpful to ignore all the short-term predictions and instead focus on long-term returns.

* Listed are total returns (includes dividends and interest) as calculated by Morningstar as of 12/31/12. 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/VEIEX, VNQ/VGLSX, BND/VBLTX).

Comments

  1. thanks, good info!

  2. Jonathan, Please help me understand and calculate the returns from investing in a Target retirement fund like VTIVX. Say, I have about 100000 invested in VTIVX today, how much will I have at the target retirement year of 2045, assuming I do not invest any more into this fund. How do I calculate the rate of return in a target fund knowing that the fund profile changes from equity based in the initial years to bond based close to the Target date. Is there a website where I can use a calculator to estimate the returns from Target retirement funds. I believe the rate of return would be higher during the initial year when it is invested heavily in equities and returns will be lower closer to the target date due to their leaning on bonds. Please advise.

  3. Thanks for the update! Two questions about the representative indices though:

    -Did you mean VGSIX instead of VGLSX?

    -For “Foreign Developed” you sometimes use VXUS and sometimes use VEU. The second seems to be missing many of the small caps, yet it is the one on TD-Ameritrade’s no-transaction-fee list so it is presumably in your “good boy” portfolio. For the same reason I have it in mine. Are we missing anything by not having exposure to the foreign developed small caps (talk about micromanaging exposure!)?

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