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
|Ferri Core four||-0.43%||-0.55%|
|Vanguard Core four||-0.74%||-0.95%|
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%
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
|Ferri Core four||6.95%||6.73%||6.06%||6.62%|
|Ferri Core four||7.22%||6.32%||11.79%||11.34%|
Coefficient of variation
|Ferri Core four||1.01||0.92||1.75||1.74|
70/30 allocation portfolios
|Ferri Core four||7.86%||7.29%||6.48%||7.06%|
|Ferri Core four||8.60%||7.64%||13.81%||13.39%|
Coefficient of variation
|Ferri Core four||1.06||1.02||1.94||1.97|