Your Portfolio Return Over the Last Year Sucks

You may not be keeping track of your return on your portfolio over the last year.  Let me pass on some information -  it probably sucks compared to recent returns.

Lets say you had a portfolio allocation as follows (conservative allocation), with returns estimated based on equivalent Vanguard Index funds:

Fund Type	Allocation	1 Yr Return
Domestic Bonds	40.00%	1.70%
Large Cap stock	24.00%	7.40%
Small Cap Stock	6.00%	5.21%
International Stock	20.00%	-6.69%
Cash	10.00%	1.00%
Total	100.00%	1.53%

So you made about 1.5%, which sucks in most peoples' minds.  Your particular return may be somewhat different depending on your exact allocation, buying and selling, etc.

But there is good news as well, let's look at the three year returns of the same portfolio.

Fund Type	Allocation	1 Yr Return
Domestic Bonds	40.00%	1.36%
Large Cap stock	24.00%	18.27%
Small Cap Stock	6.00%	19.35%
International Stock	20.00%	10.86%
Cash	10.00%	1.00%
Total	100.00%	8.36%

Looks pretty good over 3 years, right?

So a few points to consider.  

• Although most investors enjoyed high returns for the last 3 to 5 years or so, the last year was not as profitable, and this is normal.  Markets do not just keep going up and delivering double digit returns.
• Returns are still positive.  Those of us old enough to live through extended market downturns remember double digit negative returns during some multi year periods.
• It is important to stay in the market.  If you try to time your selling and buying, you will probably miss most of the eventual upturn and incur large transaction fees.

So yes, the return is not as good, but don't sweat it.  And, as always, do not believe everything you read on the Internet (like this blog) or in hard copy and consult a trusted financial advisor before making financial decisions.

Sources: WSJ.com mutual funds data