Investment Returns By Asset Class, 2015 Year-End Review

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The problem with a lot of good advice is that you really don’t understand it without experience. For example, Jack Bogle always says “Stay the course”. I was lucky enough to trust in that advice, but it took me a while to really appreciate the power of investing in productive assets and then treating them with what I call beneficial neglect. That is, I make the most money when I fight off the urge to take action.

I managed again to do as very little during the hiccups, tantrums, seizures, or other bodily functions the markets had in 2015. As the year ends, we all like to take look back and assess the situation. Here are the trailing 1-year returns for select asset classes as benchmarked by passive mutual funds and ETFs. Return data was taken from Morningstar after market close 12/31/15.

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Stocks. The Total US Stock Market (VTI) ended up mostly flat, while the rest of the world’s markets (VXUS) dropped a little bit (~4%). Emerging Markets (VWO) did the worst, with a -15% total return. US REITs (VNQ) were up a little bit (~2%). If you were like most people and owned mostly US stocks with perhaps a little international exposure, you were probably close to breaking even.

Bonds. The Total US Bond Market (BND) and short-Term Treasuries (SHY) went up a little bit. Long-Term Treasuries (TLT) and Inflation-linked Treasuries (TIP) went the other way, going down a little bit instead. There were no huge moves, despite all the talk about interest rates.

Gold dropped around 10%, joining the other industrially-useful commodities in having a down year.

Another year, another batch of predictions into the shredder. How many people were saying that oil prices, already said to be “too low” at $50, would drop another 30% in value? Did anyone listen to me when I said not to speculate with the USO ETF? A funny book that came out this year was The Devil’s Financial Dictionary by Jason Zweig. Here’s how he defines forecasting:

Forecasting (n.) The attempt to predict the unknowable by measuring the irrelevant; a task that, in one way or another, employs most people on Wall Street.

Most people who owned a diversified portfolio in 2015 had their money go nowhere or perhaps lost a little bit of money. The 2015 total return of my personal investment portfolio was roughly -1.5%, right in that “meh” range. I imagine the people who like to focus on dividends, interest, and rental income collected them happily and went about their lives. That sort of mental framework is becoming increasingly appealing to me.

Comments

  1. Mr Bogle is the man! Followed his philosophy since 2004 & averaging over 7% annual returns despite the 2008 slump.

  2. Right now we’re just spending in gold (physical gold) and it’s been pretty unsettling to see the current returns. On the other hand we’re saving this for retirement, so in 30 years things will probably look different (I hope at least :))

  3. “I imagine the people who like to focus on dividends, interest, and rental income collected them happily and went about their lives.”

    Yes. There had to be a silver lining after painfully doling out so much in property taxes and hoa fees! Worth it, nonetheless…

  4. People get interested in dividend investing when times are tough. When the stock market is roaring up, providing everyone with capital gains, strategies like dividend investing are ostracized and ridiculed. It looks to me that if markets drop in 2016, we will see a lot of people express interest in dividend investing again.

    Happy New Year!

    Dividend Growth Investor

  5. Hello Jonathan,
    Happy New Year, i m grateful for your well based advise. I’m trying to consolidate and begin managing investments, which have a long way to go to match such an astute investor as you. 🙂
    What equipment/ software do you recommend or do you personally have to accomplish this goal? I’m a long usernof PCs, since DOS (my young teenage years), but longevity is nowhere near Apple’s macs. Do you have a Mac or PC ? What specs do you have for these machines or recommend? I’m seriously thinking of switching to a Mac to save time. (I’d spent hours and hours on repairing my homes PCs). I’ve spent several years working at home on an iPod and loved it, but couldnt print (now Android smartphone). Macs are astronomically expensive, do you think it would be a good investment or you’re just paying for the brand?
    Thank you.

    • Not Jonathan, but pretty much all investing can be done via the web. All the “software” now is no longer on the computer, but on web sites. MyMoneyBlog is a website that can be accessed via Android, Ipad, PC or Mac. It really doesn’t matter.

      If I were you and based on your needs, I’d look into what is called a chrome book. It is essentially a mini computer that goes for $300 or less that allows you to access anything on the web. They are affordable, reliable, fast and bulletproof.

      Here’s a bit about them and a few pics for the best ones…

      http://thewirecutter.com/reviews/best-chromebook/

    • I personally use Macs. I buy them refurbished from the Apple store online, same warranty but about 15% cheaper (won’t be brand new though). They have lasted a lot longer than PCs for me, I got tired of having to reformat all the time. Maybe that doesn’t matter anymore… I haven’t owned a Windows PC since they rolled out Vista. I still have the very first Mac Mini that I bought around 2006 and it is used daily at my mother-in-laws house.

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