Global investment portfolios 2018 update

Creditsuisse2016The Credit Suisse Global Investment Yearbook 2018 summary is now available for download from Publications – Credit Suisse. The yearbooks are an extension of the research of Elroy Dimson, Paul Marsh, and Mike Staunton, first published in the 2002 edition of “Triumph of the Optimists”.

As of year-end 2017, the global equities market allocation consists of a 51.3% US stock market allocation with the non-US markets making up 48.7% of the market.

Global equity portfolio


Source: Credit Suisse Global Investment Returns Yearbook 2018.

The allocation of the global equity portfolio shifts over time as the following graphic indicates.


Real returns

The table below provides real returns on equities, bonds, and bills for the global portfolio based on markets in the database that have had continuous markets over the 1900-2017 period.

Period Equities Bonds Bills
1900-2017 5.2% 2.0% 0.8%
1968-2017 5.3% 4.4% 0.7%
2000-2017 2.9% 4.9% -0.5%
Source: Elroy Dimson, Paul Marsh, and Mike Staunton, Triumph of the Optimists, Princeton University Press, 2002, and subsequent research.


What can we take away from these long term return histories?

  • Historically, the markets have offered investors compensation for bearing risk, as equities have realized premium returns over bonds; and bonds have offered premium returns over bills.
    • The world risk premium for stocks over bonds was 3.20%
    • The world risk premium for bonds over bills was 1.10%
    • The world risk premium for stocks over bills was 4.30%
  • Although some nations have realized better historical performance than others, and we can expect differences in future returns, we can have no assurance of exactly which national markets will be relative winners or losers going forward.
  • Investing globally can diversify the risk that one’s home market will provide poor future returns.
  • With historical real returns for globally diversified stock/bond portfolios ranging between 3% and 4%, prudence suggests that investors should pay special attention to limiting investment costs and tax expense.

The best way to garner these returns is to index a globally diversified portfolio. Today in the US we can invest globally using index funds from a wide list of index fund providers.Vanguard makes this possible, using its four-fund balanced portfolios (see Vanguard four fund portfolio – Bogleheads) or by using separate asset class index funds for US stocks, US bonds, international stocks and international bonds.

Three Vanguard balanced portfolios

Many other investment companies now offer index funds that make creating a low cost globally diversified portfolio possible (for an overview, see Three-fund portfolio – Bogleheads) or a link from the selections in the table below.

More selections are available.

Investment Company Wiki link
Blackrock iShares Blackrock iShares
Charles Schwab Charles Schwab
Dreyfus Dreyfus
Fidelity Fidelity
Northern Funds Northern Funds
TRowe Price T. Rowe Price
Thrift Savings Plan Thrift Savings Plan

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog. In addition I serve as an administrator of finiki, the Canadian financial wiki, as an administrator of la Wiki Bogleheads® España, and as an administrator of the John C. Bogle Center for Financial Literacy site.

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