Portfolio Asset Class Returns, 2021 Year-End Review

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yearendreview2021 is finally in the books! Most of my portfolio is in low-cost index funds across various asset classes, which I purposefully ignore most of the time as I believe the proper time horizon is at least several years long. However, I do check in once a year. Per Morningstar, here are the annual returns for select asset classes as benchmarked by popular ETFs after market close 12/31/21.

Commentary. Investing is easy when everything just seems to keep on going up, up, up. The hardest part is looking over and seeing someone else making even more money. But as Warren Buffett reminds us, envy is the worst sin because you can’t even enjoy it. You just sit there and feel bad with no upside.

2021 was another year where being diversified into international developed and emerging stocks hurt your returns when compared to US stocks. However, I remain content with my market-cap-based split. If US stocks keep going up even with historically-high valuations, then that’s fine by me. If international stocks and their relatively-low valuations make a comeback, I will be covered too.

The only asset classes that dropped in value were the safe, boring bonds and the old-fashioned gold. As is often the case, they only dropped a little and at the same time as when to stocks went up, so nobody really minded much.

The “set and forget” Vanguard Target Retirement 2055 fund (roughly 90% diversified stocks and 10% bonds) was up 16.4% in 2021, almost the exact same number as last year.

In trying to think of a good takeaway, I believe a good investor should be a long-term optimist with long-term money, and remain cautious with their short-term cash reserves. This allows you to see past the current troubles and stay invested even when the outlook is uncertain. 2020 was uncertain. 2021 was uncertain. 2022 is definitely uncertain. If you always wait for the smoke to clear, you’ll miss out on some huge returns.

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Comments

  1. Having watched the lack of performance of international stocks I struggle to find a scenario where they would outperform US stocks in the long run. Even during crisis (2008 or 2020) we have seen that if US falls then the international stocks fall even more. Curious on your thoughts

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