Archive for January, 2013

2012 Asset class performance summary

Wednesday, January 2nd, 2013

The table below shows the overall gains (including dividends) of the more widely held asset classes. The big winners were US and international stocks, real estate investment trusts (REITs), and investment grade corporate bonds (US). Note that gold barely out-performed government bonds which is interesting considering all of the hoopla surrounding it. [Note: Suitable proxies for these asset classes are listed at the end of the article.]

So, how did your portfolio fare against these asset classes? Had your portfolio been equally weighted (dollar-wise) among all ten of these classes, your return would have been close to 10%. Did your broker do that well for you?

A friend of mine told me that as of December 2012, his broker-managed account returned 2% year-to-date after paying a 1% management fee. That’s certainly not an attractive return. However, he’s well into retirement and his main investment goal is preservation of capital so the trade-off in return for reduced risk may be justified.

In conclusion, you can see that stocks and real-estate continue to rebound from the “great recession” of 2008-2009. The question is whether or not the rally will continue through 2013. Looking at the market from a purely fundamental point of view, the current P/E (price to earnings) of the S&P 500 is at 16.8 which is now above its historical average of 15. The upcoming round of earnings reports should be watched to see if earnings continue to rise. A stall in corporate earnings could signal the beginning of a market correction. Should this turn out to be the case, then a move into cash or investment grade bonds would be a wise plan of action for long-term conservative investors.

Note: The above data was compiled via the Portfolio Preserver®. To learn how to maximize your portfolio returns while minimizing risk, please visit our website.

Asset class proxies
Large company stocks: DIA, SPY
Small company stocks: IWM, VB
Investment Grade Corporate bonds: LQD
Long-term Gov’t Bonds: TLT, TLO
Intermediate Gov’t Bonds: IEI, ITE
Treasury Bills: Money market funds
International Stocks: CWI, VT
International Bonds: BWX, IGOV
Gold: GLD, IAU