Instructions and notes:
- Historical returns data come from several sources, as follows
- US Large Caps: SBBI through 2004. VFIAX at Vanguard.com from 2005 on.
- US Small Caps: SBBI through 2004. VSMAX at Vanguard.com from 2005 on. Suggest not relying on accuracy of these data for years prior to 1970s-1980s.
- US REITs: Morningstar.com through 1997. VGSIX and then VGSLX at Vanguard.com from 1998 on.
- EAFE: MSCI Barra through 2004. VDMIX and, as available, VDMAX at Vanguard.com from 2005 on.
- Emerging Markets: MSCI through 2004. VEIEX and, as available, VEMAX at Vanguard.com from 2005 on.
- UK Equities: MSCI through 2004. EWU at Morningstar.com from 2005 on.
- Canada Equities: MSCI through 2004. EWC at Morningstar.com from 2005 on.
- Japan Equities: MSCI through 2004. EWJ at Morningstar.com from 2005 on.
- Long Corporate Bonds: SBBI through 2004. VWETX at Vanguard.com from 2005 on.
- 20-Year Treasury Bonds: SBBI through 2004. VUSUX at Vanguard.com from 2005 on.
- 10-Year Treasury Bonds: Synthetic data composed of two 2 parts 5-Year T-Bonds and 1 part 20-Year T-Bond. Listed for compatibility with older version of this charting tool only. Suggest not relying on accuracy of these data for all years.
- 5-Year Treasury Bonds: SBBI through 2004. VFIUX at Vanguard.com from 2005 on
- Treasury Bills SBBI through 2004. VUSXX at Vanguard.com from 2005 on.
- Gold: National Mining Association through 2004. GLD at Morningstar.com from 2005 on.
- Hedge Fund Research Fund Weighted Composite Index (HFRI FWI) for hedge fund returns. Suggest not relying on accuracy of these data for all years. This index almost certainly severely overestimates real-world returns since its figures are subject to voluntary reporting by hedge funds, its funds may not be investable, and the survivorship bias accounting suffers as the result. Hedge Fund Research strictly investable hedge fund index (HFRX) started in 2003 and has trailed the HFRI FWI index by 400-500 basis points (4-5%) annually since its inception.
Historical data are not 100% reliable with authoritative sources routinely disagreeing on exact returns for a particular investment. So don't read too much precision into the historic results. Plus/minus 50 basis points (0.5%) annually is fair error range for most widely available data such as for S&P 500 and treasuries and more should be assumed for more esoteric investments such as hedge funds and emerging markets.
- Selecting "Adjust for inflation" checkbox results in the graph using real returns (meaning returns minus inflation for the selected time period) instead of nominal returns. The plot of the actual US inflation is not affected by this selection, but all other plots are.
- All plots start at $10,000 for all investments, so it's easy to compare relative performance.
- Different data series are available for different time intervals. SBBI-based data as well as US inflation, and Gold data is available from 1926 on, US REIT data from 1986 on, Emerging Markets from 1988 on, Hedge Funds from 1990 on, and other MSCI-based data data is available from 1970 on. If you plot an investment for years before data is available, it will be plotted as having zero return, resulting in a meaningless chart. Note that while the price history for Gold is available since 1926, its price was fixed until 1972.
- For "Custom Portfolios", specify either parts or percentages of each investment. In other words, a portfolio consisting of 25% Large Caps, 25% EAFE, and 50% 10yr T-Bonds can be specified using "25", "25", and "50" for the corresponding investments or using "1", "1", and "2" (meaning "1 part Large Caps, 1 part EAFE, 2 parts 10yr T-Bonds".
- All custom portfolios use rebalancing to calculate returns. In other words, the same assigned parts/percentages are used to calculate returns of all constituent investments in the custom portfolio every year.
- To not plot a custom portfolio, delete the values of its constituent parts.
- For "My investments" section you must specify total contributions, withdrawals, and year-end values for all your accounts for the plot to be meaningful.
- To remove the "My investments" plot from the chart, clear the values you entered in the "My investments" section. The easiest way of doing this is to select the latest available year (i.e. 2012) as the year you started investing and to zero out the contribution, withdrawal, and year-end values.
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Great tool, thanks.
ReplyDeleteThere's a bug in the 'Return to this chart...' option however, where if you have say 1 T-Bill, 1 20-year T Bonds in the Custom Portfolio, then the link adds in 20-year Corporate bonds
You're right, thanks for catching that! It should hopefully be fixed now.
DeleteThanks for this great tool and site!!!
ReplyDeleteYou're very welcome!
DeleteI very much like your tool. My only question is, why don’t you have US large cap, US Medium Cap and maybe US value and US growth as categories?
ReplyDeleteI need to estimate hypothetical investment returns over several different time periods and need to show how investing in different parts of the market would have changed the return. You have US small caps, but not US large caps or medium caps (or value or growth). I need to show variations beyond the S & P 500.
Otherwise, thank you for a helpful tool.
You are welcome. I may update these charts with additional time series down the road. I prefer to not go into finer and finer granularity because I believe the apparent accuracy of such data is extremely misleading. There was no concept of "small value" or "mid-cap" indices for decades and decades until somebody came up with the idea and attempted to reconstruct its hypothetical past. Any such reconstruction is rife with assumptions. Until recently I did not even include small caps data in this charting tool for the same reason, but got too many reader requests for it and gave in. I discuss one of the pitfalls involved in reconstructing past data after the fact in: http://www.longtermreturns.com/2012/12/the-imprecise-science-of-past-returns.html
DeleteAwesome! Do the returns assume dividends are reinvested? Or are they left out altogether?
ReplyDeleteAll dividends and interest are assumed re-invested
DeleteThis tool is really great. I love that you have the 20 year Treasury in here! Do you think you could add portfolio standard deviation in here at some point? I am most interested in maximizing return/risk ratios. Thanks :)
ReplyDeleteThanks, glad you like it. I went back and forth on StDdev and decided to include "best"/"worst" and "positive"/"negative" instead, since they're more easily understandable to most people. But yes, I'll try to include StDev whenever I get some time to work on this -- can't make any promises as to when, unfortunately.
DeleteNoticed you have a synthesized 10y Treasury return, that you caution against using. Is there a reason you don't use the 10y Treasury annual returns 1928-present at the FRED St Louis website?
ReplyDeleteGood question and fair point. Here are a few reasons, some more rational than others...
Delete1) As far as I know FRED only has yields, not total return; I tried reverse engineering returns from yields buy my synthetic data ended up quite different in places from what other sources quoted. Don't know if I messed up or what happened, but it was enough for me to give up on that approach.
2) I think realistically the margin of error on all such historical data is large enough that "synthesizing" 10-yrs out of 2 parts 5-yrs and 1 part 20-yrs is "good enough". If you read how the sausage for SBBI data was made, for example, you get good appreciation for why quoting annual returns from, say, 1930s to 3rd or 4th decimal (as everyone, including me, does) is absurd.
3) I used a different source for all my data but was not happy with its consistency or scope so I switched to SBBI which goes back to 1926. So I'd need any other source I use to go back at least that far too.
Now includes US REITs data starting from 1986: http://www.longtermreturns.com/p/historical-investment-returns.html?fromyear=1986&toyear=2012&real=0&log=1&plots=REIT&customplots1=none
ReplyDeleteNote: the chart above *does* rebalance annually (and assumes zero cost for such rebalancing) for custom portfolios with multiple components.
ReplyDelete(I noticed there was some confusion among readers as to whether this tool includes rebalancing).
How would as close as possible replicate the following Vanguard ETF's (VTI,VEU,BND) Many Thanks!
ReplyDeleteVTI ~ S&P500
DeleteVEU ~ (3 parts EAFE + 1 part Emerging, since 1988) OR (EAFE, since 1970)
BND ~ 5-Yr Treasury
If you wanted to get fancy, you could approximate BND as something like 8 parts 5-Yr Treasury + 1 part 20-Year Treasury + 1 part Long-Term Corp Bond. I would just use 5-Yr Treasury though -- no point looking for false precision
I realized I forgot that I now also have small caps data... I have strong doubts about reliability of small cap numbers when we are talking pre-1980, but if you are OK with it, then you could more closely approximate VTI as 4 parts S&P 500 + 1 part Small Caps.
DeleteMany thanks again Sir! I'll tinkle with your suggestions.
DeleteHere is VTI vs SPY stockcharts and 80/20 spx-small caps with your data(same time period) https://docs.google.com/file/d/0B2-TEwQK6y_sU0xzQ013VXVLbEE/edit?usp=sharing
ReplyDeleteI would note that the period you chose is somewhat misleading since it starts right at the peak of the late 1990s large-cap bubble, with small cap valuations obviously attractive relative to large caps. I don't think we are looking at anything like that today -- the valuations of the two are quite similar. I would be very surprised if small caps outperformed over the coming 13 years by anywhere close to as much as over the past 13.
Delete