Saturday, March 15, 2008

10-year index fund returns

The table below lists the 10-year performance as of 2/29/2008 of all the Vanguard index funds where 10-year performance data is available. I have included all bond index funds, a balanced funds and a bunch of international funds along with domestic index funds.

The table is sorted by the 10-year performance in the descending order. The best performing index fund for the last 10-years is listed at the top of the table and worst performing index fund is listed at the bottom of the table. As you can see from the table that the Vanguard emerging market stock index fund had the best performance record in the last 10-years, and the Vanguard growth index fund had the worst performance record in the last 10-years.

Vanguard index Fund Name Symbol 10-year Average Annual
Total Returns as of 2/29/2008
Emerging market stock index fund VEIEX 13.80%
REIT index fund VGSIX 10.10%
Total international stock index fund VGTSX 7.46%
European stock index fund VEURX 7.31%
Long term bond index fund VBLTX 6.97%
Intermediate term bond index fund VBIIX 6.50%
Small cap index fund NAESX 6.18%
Extended market index fund VEXMX 6.00%
Total bond market index fund VBMFX 5.78%
Balanced index fund VBINX 5.37%
Short term bond index fund VBISX 5.27%
Value index fund VIVAX 5.06%
Pacific stock index fund VPACX 4.94%
Total stock market index fund VTSMX 4.46%
500 index fund VFINX 3.99%
Growth index fund VIGRX 3.07%

Now, let’s think about some history. Try to put yourself in the 1998 mindset again. 1998 was right after or during the Asian stock market crisis. During that time many emerging market stocks collapsed. After 10-years of hindsight, it looks like that it was the best time to invest in a emerging market stock index fund. At the same time, in 1998 the US stock market was soaring with high growth technology stocks leading the way. The technology stocks still had couple of years of huge run ups still left in them at that time. Everyone was investing high growth technology stocks at that time. It was precisely the wrong time to invest in those technology stocks. The technology stocks accounted for something like 30%-40% of the S&P 500 index from 1998 to 2000. Because of that the S&P 500 index also lagged behind other investment options in the last 10-years.

The important question today is, where is the best place to invest for the next 10-years. Are you investing in emerging markets today? Are you tilting your portfolio towards international stocks? Are you staying away from large growth index like S&P 500 index?



Gabbardada said...

what are you invested in? we are all try to diversify as much as we can but all our portfolios have some bias. what are you tilted towards? Nice blog btw. got it bookmarked.

Mark said...

Interesting...great blog.

I did some similar research. I looked at calendar year returns on the S&P 500 dating back to 1831.

Guess what! We've just been through the worst 10 calendar years on record...