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Sunday July 22nd 2018

Investing Returns for 2015

 Odd building in City of London. Sep-2014.
Photo courtesy Standard Travel Fotos

Year 2015 is in the history books. The year saw the invasion of Europe by massive numbers of migrants from the Middle East and Africa. In America, Donald Trump is the front runner in the presidential race, largely on his anti-migrant position. Once again, it’s time to review the investment returns for the year. Let’s look at the returns of several asset classes by looking at Vanguard Mutual Funds.

Executive Summary
2015 was a poor year for most investors. Equity risk was not rewarded. Total U.S. Stock Market gained just +0.29%, and Total International stocks lost -4.37% . Global stocks lost -2.02%.

In 2015, Global Stocks had modest losses, Bonds had tiny gains
Comparing the two fundamental asset classes, stocks and bonds, stocks lost money, bonds had tiny gains. Total World Stock Index (VTWSX) lost 2.02% while Total Bond Market Index (VBMFX) gained a tiny +0.30% and Total International Bond Index (VTIBX) gained +1.04%

Note that bonds yields are so low that the income return for stocks and bonds are about the same.

Table 0.1 2015 Investment Return for Vanguard Total World Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VTWSX Total World Stock Index -4.21 2.19 -2.02
VMNVX Global Min Volatility 3.91 1.96 5.87
VBMFX Total Bond Market Index -2.02 2.32 0.30
VTIBX Total Intl Bond Index -0.57 1.60 1.04

2015 Stock Returns: Losses in International

U.S. stocks had meager returns, all from dividend income. International stocks showed capital losses, offset slightly by the always-positive dividend income. Yay, dividends.

Table 1.1 2015 Investment Return for Vanguard Total Stock Index Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VFINX S&P 500 Stock Index -0.74 1.99 1.25
VTSMX Total Stock Market Index -1.55 1.84 0.29
VGTSX Total Intl Stock Index -6.82 2.44 -4.37

Growth stocks grew while Value Stocks Lost
U.S. Value stocks (VIVAX) had losses while U.S. Growth stocks (VIGRX) eeked out a modest gain. No  value premium last year.

Table 1.2 2015 Investment Return for Vanguard U.S. Value and Growth Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VIVAX Value Index -3.43 2.40 -1.03
VIGRX Growth Index 1.99 1.18 3.17

Large-Cap Stocks Beat Small-Cap Stocks
Large-cap (VLACX) had tiny gains while small-cap stocks (NAESX) had almost 4% losses. No small-cap premium last year, either.

Table 1.3 2015 Investment Return for Vanguard Large and Small-cap U.S. Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VLACX Large-Cap Index -0.89 1.83 0.93
NAESX Small-Cap Index -5.07 1.29 -3.78

Small-Cap Value Had Greater Losses Than Small-Cap Growth
The risk showed up for investors who tilted to Small-cap Value. They lost almost -5%.  Small-cap growth was not much better. If small-cap growth is the “black hole” of investing, then small-cap value must be the super-massive black-hole at the center of the galaxy.

Real Estate Investment Trusts (REITs) had small gains. Not too shabby, even after +30% in 2014. Go REITs.

Table 1.4 2015 Investment Return for Vanguard Small-cap U.S. Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VISVX Small-Cap Value Index -6.51 1.74 -4.78
VISGX Small-Cap Growth Index -3.45 0.81 -2.64
VGSIX REIT Index -1.63 3.85 2.22

Dividend Stocks Had Meager Returns

Most dividend stock funds had minimal gains. The Utility Sector lost value. Lower-risk Consumer Staples sector managed to return +6%.

Table 1.5 2015 Investment Return for Vanguard Dividend Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VHDYX High Dividend Yield -2.83 3.13 0.30
VEIPX Equity Income -2.07 2.84 0.77
VDIGX Dividend Growth 0.73 1.89 2.62
VDAIX Dividend Appreciation -4.19 2.14 -2.05
VPU Utilities ETF -8.24 3.41 -4.83
VDC Consumer Staples ETF 3.24 2.76 6.00

Big Losses in Emerging Markets
Emerging market stocks was the big loser in 2015. European stocks had small losses while Asian stocks had small gains. Developed Markets Index is closed to new investors

Table 1.6 2015 Investment Return for Vanguard International Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VDMIX Developed Market Index NA NA NA
VEIEX Emerging Market Stock Index -17.77 2.31 -15.40
VEURX European Stock Index -4.75
2.75 -2.00
VPACX Pacific Stock Index 0.00 2.25 2.25

Small Foreign Stocks Did Great
A big surprise is the +8.6 gain for small foreign stocks. Who expected that?

International value stocks (VTRIX) did very poorly, international growth stocks (VWIGX) better, but they both had losses. Global real-estate (VGXRX) had small losses.

Table 1.7 2015 Investment Return for Vanguard International Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VTRIX International Value -8.42
1.98 -5.66
VWIGX International Growth -2.04
1.37 -0.67
VINEX International Explorer 6.98 1.62 8.60
VGXRX Global ex-US Real Estate -4.01
2.53 -1.48

Bonds in 2015: Long Term-risk NOT Rewarded
Interest rates started to rise in 2015  and Treasury investors had small capital losses. The sweet spot was intermediate term Treasuries

Table 2.1 2015 Investment Return for Vanguard Treasury Bond Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VFISX Short-Term Treasury -0.22 0.68 0.45
VFITX Intermediate-Term Treasury -0.16 1.66 1.50
VUSTX Long-Term Treasury -4.21 2.67 -1.54
VIPSX Inflation-Protected Securities -2.57 0.74 -1.83

Te story was different in the Municipal bond arena. The long-term muni’s did better than both intermediate and short term munis.

Table 2.2 2015 Investment Return for Vanguard Municipal Bond Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VWSTX Short-Term Tax-Exempt -0.25 0.70 0.45
VWITX Intermediate-Term Tax-Exempt -0.07 2.93 2.86
VWLTX Long-Term Tax-Exempt 0.22 3.75 3.97
VWAHX High-Yield Tax-Exempt 0.35 3.78 4.13

Long term corporate bond had almost 5% losses. Short and intermediate had tiny gains. Junk bonds had small losses.

Table 2.3 2015 Investment Return for Vanguard Corporate Bond Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VCSH Short-Term Corp -0.74 1.99 1.25
VCIT Intermediate-Term Corp -2.38 3.26 0.88
VCLT Long-Term Corp -8.79 4.16 -4.63
VWEHX High-Yield Corporate -6.72 5.32 -1.39

2015 Balanced Fund Returns

Almost all investors hold some kind of a balanced portfolio. Vanguard Balanced Index Fund (60/40), with a meager 2% yield, had about total return close to zero, as did Wellington with 60% stocks. Wellesley managed just over +1% total return .

Warren Buffett’s Berkshire-Hathaway had a whopping -12% loss.

Table 3.1 2015 Investment Return for Several Vanguard Balanced Funds.
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VBINX Balanced Index -1.55 1.92 0.37
VWINX Wellesley Income -1.73 3.01 1.28
VWELX Wellington 2.51 2.56 0.06
BRK.A Berkshire-Hathaway 12.48 0 -12.48
HBPP Harry Browne Permanent Portfolio -2.91

The Harry Browne Permanent Portfolio, which splits equally between gold, stocks, long-term Treasuries and cash, had about -3% return.

The price of gold was down -10.58%, while Total Stock Market (VTI) was up +0.29%. iShares 1-3 Year Treasury Bond (SHY) returned a paltry 0.43%. But the 1/4 of the portfolio in iShares 20+ Year Treasury Bond (TLT) was down -1.79%.

Summary: Investors did poorly in 2015
There were only a few barely bright spots in 2015: U.S. Consumer Staples, small international growth stocks, muni bonds.

Typical balanced investors, if they stuck to their asset allocation, saw 0% to 1% total returns.

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