Retirement investors are faced with two basic investment choices: pay high fees for professional mutual fund managers to beat the market (called "active" investing) or invest in low fee funds that
simply own all of the stocks in a given group (called "passive" investing). Reams of academic and professional studies show that over time a passive approach makes you more money than an active
approach.
Calculate how your retirement portfolio is doing by comparing it to one of our 5 passive low fee portfolios. If your portfolio isn't doing at least this well, then "Houston, we've got a problem!"
Here's how to use these benchmarks for any of your investment accounts:
A. Pick A Portfolio To Use As A Benchmark.
Calculate the % of bonds and cash in your portfolio. For example, if you have a $50,000 account and $15,000 is invested in bond or bond funds then you'll use our 30% Bond portfolio for comparing
returns. Alternatively, if you have all of your money invested in stocks and you have $5,000 in cash, you'll use our 10% Bond portfolio.
B. Calculate your 2011 return.
Record your beginning balance on 12/31/10 and then adjust it by adding or subtracting funds that went in or out of the account during the year. This is your "adjusted beginning balance." Record your
ending balance on 12/31/11. Your investment profit / loss is your ending balance minus your "adjusted" beginning balance. Divide this investment profit / loss by your adjusted beginning balance and
this is your 2011 return.
C. Compare.
Compare your 2011 return with the right MarketRiders Benchmark Portfolio below. If you have a 30% Bond portfolio and you didn't have a return greater than 12.9%, then you lost money. If necessary,
you may be in the middle of 2 portfolios, so do an average.
| Symbol | Income 80% Bond | Balanced 60% Bond | Balanced 40% Bond | Growth 20% Bond | S&P 500 | |
|---|---|---|---|---|---|---|
| US Inflation Protected Bonds | TIP | 13.0% | 10.0% | 7.0% | 5.0% | |
| Government & Corporate Bonds | AGG | 67.0% | 50.0% | 33.0% | 15.0% | |
| Emerging Market Stocks | EEM | 2.0% | 4.5% | 6.5% | 8.5% | |
| Foreign Developed Stocks | EFA | 5.0% | 9.0% | 13.5% | 17.0% | |
| Real Estate | IYR | 4.0% | 6.0% | 10.0% | 13.0% | |
| US Large Cap Stocks (S&P 500) | IVV | 6.0% | 15.0% | 20.0% | 27.0% | |
| US Small Cap Stocks (S&P 600) | IJR | 3.0% | 5.5% | 10.0% | 14.5% | |
| TOTAL | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | |
Annualized Portfolio Returns* | ||||||
| 5 Year Return (1/1/07 - 12/31/11) | 4.8% | 3.9% | 2.4% | 1.0% | 1.2% | |
| 3 Year Return (1/1/09 - 12/31/11) | 8.1% | 10.1% | 12.3% | 13.6% | -3.6% | |
| 1 Year Return (1/1/11 - 12/31/11) | 6.6% | 4.7% | 2.9% | 1.0% | 1.9% | |
