Sunday, February 10, 2008

ETF portfolio 2007 returns

With the carnage currently going on in the worldwide financial markets, it seems odd to be talking about last year's returns... But maybe that's exactly what one needs to do

Some time ago I had written about using a portfolio of ETFs. In that post I had recommended a specific set of portfolios originally suggested by Burton Malkiel. So how did these portfolios do in 2007? Not too bad, it turns out:
  • Conservative portfolio: 3.2%
  • Moderately conservative: 5.2%
  • Moderately aggressive: 7.7%
  • Aggressive portfolio: 10.6%
(All returns as reported by Morningstar. Returns include reinvested dividends, with reinvestment taking place as soon as possible. Returns do not include the effect of taxes.)

For comparison, the S&P 500 returned 5.5% in 2007.

The details of the returns in the various components of the portfolios can be found here. Some noteworthy points:
  • Emerging markets (VWO) did particularly well last year, returning 37.3%.
  • REITs (VNQ) crashed horribly, returning -16.5%. This is presumably related to real estate woes led by the sub-prime crisis.
  • Surprisingly (to me at least), Treasury Inflation-Protected bonds (TIP) did remarkably well, returning 11.9%.
All in all, a modest year for the portfolios. 2006 was substantially better---I don't have the details but the moderately aggressive portfolio that we use returned somewhere between 16% and 17%. This year is proving to be much more challenging, with all markets already down some 10%. Nonetheless, I'm going to stay the course. Let's see what the year brings.

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