Asset Class Returns by ETF, 2018 Year-End Review

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yearendreviewAnother one in the books! I don’t track the market daily as I think the discussion is full of noise and after-the-fact justifications. I check my portfolio quarterly to see where to reinvest dividends. At the end of the year, I like to record the annual returns for select asset classes as benchmarked by passive mutual funds and ETFs. Here is the 2018 data taken from Morningstar after market close 12/31/18.

Commentary. In 2017, the performance of every asset class was positive. The lowest positive return was from short-term US Treasuries. For 2018, the performance of nearly every asset class was negative. The highest return was from… short-term US Treasuries. T-Bills and short-term Treasury bonds are slow, steady, and safe.

My favorite “keep-it-simple” multi-asset balanced fund, the Vanguard Target Retirement 2045 fund (roughly 90% diversified stocks and 10% bonds) was down about 7.9% in 2018. (It was up about 21.4% in 2017.) The benchmark for our personal portfolio, a more conservative mix of 70% stocks/30% bonds as we are close to living off it, was down about 6.5% in 2018. (It was up about 15.1% in 2017.)

Despite their relatively poor performance this year, I’m still satisfied with my international and emerging markets holdings on a valuation basis. I’m getting an overall earnings yield on VXUS (Total World ex-US) of ~7.8%, and out of that a dividend yield of ~3.2%. This is compared to VTI (Total US) with an overall earnings yield of ~5.5% and out of that a dividend yield of ~2.0%.

On the bond side, I am also happy that interest rates are back to the point where you actually might earn more than inflation. Currently, the 1-year US Treasury yields 2.63% and a 10-year yields 2.7%. The 5-year TIPS has a 1.0% real yield and a 10-year TIPS has 1.0% real yield.

As usual, I have no predictions about stock prices. However, I am confident that the hundreds of business that I own through these ETFs and mutual funds will choose to distribute a portion of their profits to me in the form of cash dividends. I am also confident that my US government and municipal bonds will pay the promised interest on time. I’ll try my best to spend those dividends and interest and ignore the price swings.

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  1. The Frugal Millionaire says:

    Thanks, Jonathan, for another year of great information! My wife and I have all of our retirement investments at Vanguard, and it has become a New Years Day tradition to go to their website and print out their list of all 130 of their mutual fund offerings, arranged by asset class.
    We get the annual performance for the previous year, paying special attention to the funds we own of course, but also to compare them to similar funds in the same categories.
    We find this information useful, perhaps others might, too. I’m sure other fund companies have something similar.

  2. Thanks, I always look forward to these updates. Nice reminder. The chart above doesn’t show it, but the best performing asset class for 2018 was cash 🙂
    (According to data from

  3. Jonathan

    Thanks for sharing your great investment ideas. Do you have any info on 2018 returns on your bond porfolio, i.e. muni portion ?

  4. Thanks for sharing the chart @Freedom35. I just asked Jonathan return on tax exempt. Do you have to pay to have access to the chart?


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