Safehaven | Major Asset Class 1,3,5,10 and 15 Year Returns

May 05, 2008

Major Asset Class 1,3,5,10 and 15 Year Returns
by Richard Shaw

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

Richard Shaw
QVM Group LLC