Lazy Portfolios in 2015

assetallocationpiechart

The following table lists 2015 total returns for various examples of “lazy portfolios”.

Some of the portfolios (Coffeehouse and Coward’s) are designed as  60/40 stock/bond portfolios. Other portfolios (Ideal and Swensen) are designed as 70/30 stock/bond portfolios.  The two-fund, three-fund, and four-fund portfolios are scaled to similar stock/bond allocations. The returns are derived from investments in  investor share class Vanguard index funds. Lower cost admiral share class funds would add approximately +0.10% to returns. Detailed descriptions of each portfolio’s annual returns are linked.

 2015 total return

Portfolio 60/40 70/30
Two-fund -1.09% -1.32%
Three-fund -0.79% -0.97%
Ferri Core four -0.43% -0.55%
Vanguard Core four -0.74% -0.95%
Coffeehouse -0.93%
Coward’s -0.82%
Ideal -1.55%
Swensen -0.34%

While the stock/bond allocations of the portfolio’s are similar, sub asset class allocations differ, accounting for difference in returns. The stock allocation differences include:

  • Value tilts: The Coffeehouse, Coward’s, and Ideal portfolios employ value tilts to the US stock portfolio allocation. In 2015 value stocks under performed growth stocks.
  • REITs: The Ferri Core Four, Coffeehouse, Cowards, Ideal, and Swensen portfolios include an allocation to equity REIT index funds. In 2015 equity REITS slightly out performed the overall US market.
  •  International stocks: Each of the portfolios include international stocks, but with differing allocation ranges. In 2015 international stocks under performed US stocks.

Bond allocation differences include:

  • Bond maturities: The Coward’s and Ideal portfolios employ short-term bonds in the bond allocation. All other portfolios use intermediate-term bonds. In 2015 short-term bonds slightly out-performed  intermediate-term bonds.
  • International bonds: The Vanguard four-fund portfolio has an allocation to hedged international bonds. All other portfolios invest in US bonds. In 2015 international bonds slightly outperformed US bonds.
  • Inflation-indexed bonds: The Swensen portfolio is the only portfolio with an allocation to  US inflation-indexed treasury bonds. In 2015 US inflation-indexed bonds slightly under performed US nominal bonds.

2015 asset class benchmark index returns:

  • CRSP Total US market: +0.40%
  • CRSP US Value: -0.86%
  • CRSP US Small: -3.68%
  • CRSP US Small Value: -4.64%
  • US REITS: + 2.22%
  • FTSE Global All Cap ex US Index: –4.29%
  • US Barclays Aggregate: +0.44%
  • US Barclays 1-5: +0.97%
  • Barclays US Trsy Inflat Prtcd Index: –1.44%
  • Barclays Global Aggregate ex-USD hedged: + 1.34%

Historical returns

The following tables provide historical portfolio returns. Keep in mind that past performance does not predict future performance.

The coefficient of variation statistic is a simple measure of risk adjusted return (standard deviation divided by the mean return.)  The the lower the ratio of standard deviation to mean return, the better your risk-return trade off.

60/40 allocation portfolios

Compound return

Portfolio 3yr 5yr 10yr 15yr
Two-fund 5.29% 5.69%
Three-fund 7.05% 6.67% 5.99% 5.52%
Ferri Core four 6.95% 6.73% 6.06% 6.62%
Coffeehouse 7.56% 7.29% 6.34% 6.73%
Coward’s 6.97% 6.27% 5.60% 6.30%

Standard deviation

Portfolio 3yr 5yr 10yr 15yr
Two-fund 6.96% 6.89%
Three-fund 8.31% 7.05% 11.82% 11.54%
Ferri Core four 7.22% 6.32% 11.79% 11.34%
Coffeehouse 8.02% 6.67% 11.74% 11.16%
Coward’s 8.43% 7.64% 13.46% 12.21%

Coefficient of variation

Portfolio 3yr 5yr 10yr 15yr
Two-fund 1.28 1.30
Three-fund 1.14 1.03 1.76 1.88
Ferri Core four 1.01 0.92 1.75 1.74
Coffeehouse 1.03 0.90 1.68 1.53
Coward’s 0.97 0.97 1.75 1.74

70/30 allocation portfolios

Compound return

Portfolio 3yr 5yr 10yr 15yr
Two-fund 5.92% 5.42%
Three-fund 7.96% 7.22% 6.10% 5.51%
Ferri Core four 7.86% 7.29% 6.48% 7.06%
Ideal 6.04% 5.41% 5.37% 5.92%
Swensen 7.04% 7.39% 6.46% 7.12%

Standard deviation

Portfolio 3yr 5yr 10yr 15yr
Two-fund 8.42% 8.35%
Three-fund 9.96% 8.54% 13.90% 13.63%
Ferri Core four 8.60% 7.64% 13.81% 13.39%
Ideal 8.71% 8.41% 14.25% 13.73%
Swensen 6.55% 6.04% 13.70% 12.96%

Coefficient of variation

Portfolio 3yr 5yr 10yr 15yr
Two-fund 1.37 1.47
Three-fund 1.14 1.03 1.78 1.88
Ferri Core four 1.06 1.02 1.94 1.97
Ideal 1.39 1.48 2.25 2.02
Swensen 1.05 0.95 1.95 1.70
About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog

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Posted in Market statistics, Portfolios
February 2016
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