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Monday August 20th 2018

Investing Returns for 2016

Chicago Board of Trade Building. Sep-2010.
Photo courtesy Standard Travel Fotos

Financial Year 2016 is in the history books. The year saw the continued invasion of Europe by massive numbers of migrants from the Middle East and Africa. In America, Donald Trump won the Presidential race. 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
2016 was a decent year for most investors. Equity risk was rewarded. Total U.S. Stock Market gained a healthy +12.53%, while Total International stocks gained 4.65% . Global stocks gained +8.67%.

In 2016, Global Stocks had decent gains, Bonds had smaller gains
Two fundamental asset classes, stocks and bonds, with made money. Total World Stock Index (VTWSX) gained a respectable +8.67% while Total Bond Market Index (VBMFX) gained a tiny +2.50% and Total International Bond Index (VTIBX) gained +3.67%

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

Table 0.1 2016 Investment Return for Vanguard Total World Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VTWSX Total World Stock Index 6.14 2.53 8.67
VMNVX Global Min Volatility 5.58 2.97 8.55
VBMFX Total Bond Market Index 0.14 2.36 2.50
VTIBX Total Intl Bond Index 2.75 1.92 4.67

2016 Stock Returns: US Shined

U.S. stocks had good returns, mostly from price increases. International stocks showed measure capital return.

Table 1.1 2016 Investment Return for Vanguard Total Stock Index Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VFINX S&P 500 Stock Index 9.60 2.22 11.82
VTSMX Total Stock Market Index 10.40 2.14 12.53
VGTSX Total Intl Stock Index 1.66 2.00 4.65

Values Crushed Growth
U.S. Value stocks (VIVAX) had outstanding returns while U.S. Growth stocks (VIGRX) had average gains.

Table 1.2 2016 Investment Return for Vanguard U.S. Value and Growth Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VIVAX Value Index 13.89 2.86 16.75
VIGRX Growth Index 4.64 1.36 5.99

Small-Cap Stocks Beat Large-Cap Stocks
Small-cap (NAESX) had big gains while large-cap stocks (VLACX) also had good gain.

Table 1.3 2016 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 9.34 2.16 11.50
NAESX Small-Cap Index 16.44 1.73 18.17

Small-Cap Value Had Tremendous Gains
After last year’s losses,  Small-cap Value had huge gains in 2016. Up almost +25%.  Small-cap growth was not bad.

Real Estate Investment Trusts (REITs) had average gains.

Table 1.4 2016 Investment Return for Vanguard Small-cap U.S. Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VISVX Small-Cap Value Index 22.41 2.23 24.65
VISGX Small-Cap Growth Index 9.51 1.10 10.61
VGSIX REIT Index 3.44 4.90 8.34

Dividend Stocks All Had Good Returns

Most dividend stock funds had excellent gains, especially Utilities and High-Dividend.

Table 1.5 2016 Investment Return for Vanguard Dividend Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VHDYX High Dividend Yield 13.31 3.44 16.75
VIHAX* Intl High Dividend Yield 9.32 2.71 12.03
VEIPX Equity Income 11.48 3.22 14.70
VDIGX Dividend Growth 5.49 2.04 7.53
VDAIX Dividend Appreciation 9.42 2.31 11.73
VPU Utilities ETF 13.85 3.67 17.52
VDC Consumer Staples ETF 3.82 2.49 6.31

* VIHAX since inception 03/02/2016

Losses in Europe
While stocks in the rest of the world were going up, European stocks were going down. Apparently investors don’t like what they’re seeing going in in Europe, with Terrorist attacks and woman being assaulted. Europe is verruckt.

Table 1.6 2016 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 8.93 2.56 11.50
VEURX European Stock Index -4.10 3.30 -0.80
VPACX Pacific Stock Index 2.59 2.60 6.19

Foreign Stock Sectors Nothing to Write Home About
Continuing the theme of weak gains or small losses in International stocks.

Table 1.7 2016 Investment Return for Vanguard International Stock Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VTRIX International Value 2.12 2.33 4.46
VWIGX International Growth 0.43 1.28 1.71
VINEX International Explorer -3.66 1.89 -1.77
VGXRX Global ex-US Real Estate -3.26 4.76 1.50

Bonds in 2016: Rising rates meant Capital Losses
Rising interest rates spoiled the end of the year for Bond Traders.

Table 2.1 2016 Investment Return for Vanguard Treasury Bond Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VFISX Short-Term Treasury 0.21 0.88 1.08
VFITX Intermediate-Term Treasury -0.37 1.55 1.19
VUSTX Long-Term Treasury -1.34 2.54 1.20
VIPSX Inflation-Protected Securities 1.09 3.43 4.52

Same story for Municipal bonds. Smart investors took advantage of Tax-loss Harvesting.

Table 2.2 2016 Investment Return for Vanguard Municipal Bond Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VWSTX Short-Term Tax-Exempt -0.51 0.86 0.36
VWITX Intermediate-Term Tax-Exempt -2.69 2.68 0.08
VWLTX Long-Term Tax-Exempt -2.83 3.45 0.63
VWAHX High-Yield Tax-Exempt -2.74 3.57 0.83

In the corporate sector, bonds had decent gains. Go figure. Long bonds and Junk bonds did best.

Table 2.3 2016 Investment Return for Vanguard Corporate Bond Funds
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VCSH Short-Term Corp 0.51 2.12 2.63
VCIT Intermediate-Term Corp 1.95 3.35 6.30
VCLT Long-Term Corp 5.95 4.65 10.60
VWEHX High-Yield Corporate 5.27 5.92 11.19

2015 Balanced Fund Returns

Many investors hold 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 .

Table 3.1 2016 Investment Return for Several Vanguard Balanced Funds.
SYMBOL FUND NAME CAPITAL RETURN INCOME RETURN TOTAL RETURN
VBINX Balanced Index 6.47 2.16 8.63
VWINX Wellesley Income 4.97 3.01 8.08
VWELX Wellington 8.16 2.85 11.01
BRK.A Berkshire-Hathaway 23.43 0 23.43
HBPP Harry Browne Permanent Portfolio 5.68

The Harry Browne Permanent Portfolio showed a 5.68% total return in 2016, not much different than other balanced investors. This portfolio splits equally between stocks, gold, long-term Treasuries and cash. It is important to re-balance each asset back to 25% at the start of the year. Otherwise your asset allocation and performance will drift.

Total Stock Market (VTI) was up +12.68%, while the price of Spdr Gold Shares (GLD) was up +8.03%. The 1/4 of the portfolio in iShares 20+ Year Treasury Bond (TLT) was up +1.18%  and iShares 1-3 Year Treasury Bond (SHY) returned a paltry 0.82%. These numbers are from Morningstar.com.

Summary: Most investors did OK in 2016
There were only a few bad spots in 2016: European Socks, intermediate and long Treasuries and muni bonds.

Balanced investor saw  5% to 8% total returns.

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