The following table lists 2017 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 (Armstrong 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.
2017 total return
|Ferri Core four||14.18%||15.97%|
|Vanguard Core four||15.41%||17.46%|
While the stock/bond allocations of the portfolios are similar, sub asset class allocations differ, accounting for difference in returns. The stock allocation differences include:
- Value and small tilts: The Coffeehouse, Coward’s, and Armstrong Ideal portfolios employ value and small tilts to the US stock portfolio allocation. In 2017 growth stocks outperformed value stocks. Large cap stocks also outperformed small cap stocks.
- REITs: The Ferri Core Four, Coffeehouse, Coward’s, Armstrong Ideal, and Swensen portfolios include an allocation to equity REIT index funds. In 2017 equity REITS underperformed the overall US market.
- International stocks: Each of the portfolios include international stocks, but with differing allocation ranges. International weighting in the portfolios ranges from a low of 10 percent in the Coffeehouse portfolio to a high of 30 percent for the Armstrong Ideal portfolio. In 2017 international stocks outperformed US stocks. Within the market, emerging market stocks outperformed developed market stocks.
Bond allocation differences include:
- Bond maturities: The Coward’s and Armstrong Ideal portfolios employ short-term bonds in the bond allocation. All other portfolios use intermediate-term bonds. In 2017 short-term bonds underperformed 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 2017 US bonds outperformed international bonds.
- Inflation-indexed bonds: The Swensen portfolio is the only portfolio with an allocation to US inflation-indexed treasury bonds. In 2017 US intermediate nominal bonds outperformed US inflation-indexed bonds.
2017 asset class benchmark index returns:
|CRSP Total US market||21.19%|
|CRSP US Value||17.16%|
|CRSP US Small||
|CRSP US Small Value||11.83%|
|MSCI US REITS||5.07%|
|FTSE Global All Cap ex US Index||27.41%|
|US Bloomberg Barclays Aggregate||
|US Bloomberg Barclays 1-5||1.27%|
|Bloomberg Barclays US Trsy Inflat Prtcd Index||3.01%|
|Bloomberg Barclays Global Aggregate ex-USD hedged||2.57%|
The following tables provide historical asset class and portfolio returns.
Asset class returns
The differential in longer term portfolio returns is mostly dependent on the returns of the market segments each portfolio weighs in its allocations. The table below provides equity index returns over the ten and fifteen year holding periods.²
|CRSP Total Market||8.56%||8.36%|
|CRSP Large Cap||8.51%||10.09%|
|CRSP Large Value||9.69%||10.77%|
|CRSP Small Cap||10.03%||12.51%|
|CRSP Small Value||11.10%||12.66%|
|MSCI US REITS||7.44%||10.82%|
|FTSE Global All Cap ex US Index||2.39%||9.54%|
Bond selection also differentiates returns. Thus, while both the Coward’s portfolio and the Armstrong Ideal portfolios employ short-term bond allocations, the Coward’s portfolio uses short-term investment grade bonds, which have provided higher returns over investment periods. The Swenson portfolio uses intermediate treasuries and treasury inflation protected bonds.³
|Bond returns||Total bond||Intermediate Treasury||TIPS||ST bond index||ST investment grade|
Portfolio returns are provided in the following tables. Keep in mind that past performance does not predict future performance.
60/40 allocation portfolios
|Vanguard Core four||6.70%||–||–||–|
|Ferri Core four||6.99%||8.34%||6.09%||8.07%|
|Vanguard Core four||8.08%||–||–||–|
|Ferri Core four||7.31%||6.02%||11.79%||10.77%|
|Vanguard Core four||0.85||–||–||–|
|Ferri Core four||0.94||1.41||0.52||0.69|
70/30 allocation portfolios
|Vanguard Core four||7.75%||–||–||–|
|Ferri Core four||7.45%||9.38%||6.30%||8.62%|
|Vanguard Core four||9.21%||–||–||–|
|Ferri Core four||8.26%||7.06%||13.80%||12.70%|
|Vanguard Core four||0.83||–||–||–|
|Ferri Core four||0.93||1.35||0.48||0.65|
¹ The lone exception to using investor shares in return calculation is for the Developed markets asset class. We use the returns history of the former Vanguard Tax-Managed International fund, which after a 2013 merger, was rechristened the Vanguard Developed Market Index Fund. Historically, the fund issued what were essentially admiral shares to investors. For consistency, we use admiral share returns for this fund.
² Index return data sources are from the following list of Bogleheads® wiki pages:
- US total market index returns
- US large cap index returns
- US small cap index returns
- US equity REIT index returns
- Global ex US market index returns