The utility of “Buy and Hold”, AKA Strategic Asset Allocation, was once again demonstrated in 2010.
The 2010 Callan Periodic Table of Investment Returns was recently published. A link to the Periodic Table is here. BlackRock has a periodic table tool, which supports the creation of customized reports. I prefer the BlackRock tool because the table includes a Diversified Portfolio. A link to the BlackRock 2010 table is here. You can also click on the thumbnail image below.
- Large Cap Core, AKA S&P 500 Index, continued the recovery from 2008 with a 15.06% gain in 2010, while fixed income, AKA Aggregate Bond Index, provided a steady return of 5.2% in 2008, 5.9% in 2009, and 6.5% in 2010.
- The Diversified Portfolio is composed of 35% of the Barclays Capital US Aggregate Bond Index, 10% of the MSCI EAFE Index, 10% of the Russell 2000 Index, 22.5% of the Russell 1000 Growth Index and 22.5% of the Russell 1000 Value Index.
- It’s impossible to predict with any certainty which asset class will “win” in 2011.
- The Diversified Portfolio returned 12.99% in 2010, or 86.25% of the S&P 500 all equity asset class.
- The Diversified Portfolio produced annualized returns of 8.89% , 97.26% of the S&P 500 all equity asset class.
The table is a pictorial view of the benefit of a diversified portfolio, which consistently provides relative returns in the middle of the pack. It’s important to own a mix of stocks, bonds, and cash, diversified across multiple asset classes to reduce the volatility of returns in a portfolio. You can see this by comparing the Diversified Portfolio returns to those of any single asset class over the years.