Asset classes performance over time chart

Linton

AnotherJoe wrote: »

Here we go I think https://www.vanguard.co.uk/documents/adv/literature/tactical-asset-allocation-equity-and-bond.pdf

Thanks, updated figures:


Having spent some time spreadsheeting I can give you the answers, assuming no errors .......

Returns over 19 yars (2000-2018), starting with 10% in each class - this is 60/40 equity/bonds
1) Rebalanced every year: 225% total return = 6.36% annual
2) No rebalancing:197% total return = 5.89% annual

Global equity: 186% total return = 5.7% annual

The best single performer was EM equity at 336% total return=8.1% annually

Not as much difference from the 2000-2014 figures as I had thought.

AnotherJoe

I find those numbers surprisingly low especially global equity.
And also that EM was best performer.
I'd have guessed 8-9% for global equity.

I wonder if there are similar charts for asset classes eg tech healthcare, mining, finance and so on? As per another thread I'm thinking that might provide more diversification.

Linton

AnotherJoe wrote: »

I find those numbers surprisingly low especially global equity.
And also that EM was best performer.
I'd have guessed 8-9% for global equity.

I wonder if there are similar charts for asset classes eg tech healthcare, mining, finance and so on? As per another thread I'm thinking that might provide more diversification.

Perhaps you are suffering from recency bias. Dont forget that 2000 was the height of the .com bubble. Someone who invested in the FTSE World Index on 1st Jan 2000 would still be showing a 20%-30% loss at the lowest point of the 2008 crash. The period 2000-2009 was very different to that of 2009-2018. The second best performer 2000-2018 was, perhaps surprisingly, UK Index Linked Gilts. However it has been one of the lowest performers since 2009. About the only thing longer term historical data seems to show is that you cant get very much useful for future prediction from it.

You can get good long term data from Trustnet/tools/charting if you tick Plot Sector without choosing a fund.

I will try to publish my spreadsheet once I work out how to do it.

Linton

Try https://drive.google.com/file/d/1G-3mRnD3u-LW5GbMIr-skniIsRC2nKWg/view?usp=sharing for my spreadsheet.

bd10

Here's another very long term study:
https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations?lang=en

Albermarle

Returns over 19 yars (2000-2018), starting with 10% in each class - this is 60/40 equity/bonds
1) Rebalanced every year: 225% total return = 6.36% annual
2) No rebalancing:197% total return = 5.89% annual

Is it possible to take the following simplistic view on these figures?

1) Buy low cost equity/bond trackers for 0.1% cost @a 60/40 split but don't rebalance ( through laziness, lack of knowledge etc ) and 'lose' 0.47% a year .
2) Buy a multi asset fund for 0.25% a year which will rebalance itself and job done ?

Thrugelmir

Rebase from 2008 and the start of QE. A US centric bond portfolio would have yielded 2.5%. The heavy lifting is entirely down to equities @ 10.3%. Other major economies will have followed a similar trend.

Nothing inherently wrong with a 60/40 portfolio. As provides a disciplined approach for investors. Though the returns going forward may well disappoint. If investors expect longer term historic returns to be maintained.

As for commodities. Around 50% of output is consumed by China. That's the price driver for share prices. Though you'd expect the Chinese to be securing supplies without the need to buy on the open market.

Linton

It’s very easy to advocate a strategy with hindsight. A very high high %equity portfolio may have been optimal in the past 10 years but would have provided a poor return in the decade from 2000, particularly if it had a high % US.

The problem is how to invest now for the next decade. People early in their working lives can take the view that a decade is too short a time to worry about and rely on the very long term performance of equities. Once they reach retirement however most people without significant DB pensions will not be able to afford to maintain the cash reserves required to last a decade of poor equity performance.

Given that we cannot predict the future the solution for people living off their investments now or in the next 10 years must be to invest across many types of asset, particularly those that provide a steady return. I would consider 60% general equity a maximum appropriate for those people with large pension pots.

The non equity part of the portfolio should include other things than very safe fixed return government bonds. One could considerfor example the use of corporate bonds, commodities, property, infrastructure, and very defensive equity such as utilities. The investments do not have to be low risk provided their risk is uncorrelated as far as possible with general equity risk.