Asset allocation means always having something to complain about. In 2012 that category was Natural Resource stocks which returned a meager 2.2%. US Bonds returned 4.22% and Global Bonds returned 4.32%.
The indexes that had the best returns were Emerging Markets (18.63%), Russell 2000 Small Cap (16.35%), S&P 500 (15.98%) and MSCI EAFE Foreign Index (13.55%). Domestic markets generally performed better in the first half of the year and foreign markets in the second half of the year. Here is a chart showing how investments in these indexes performed over the year:
And here is the return of each index by each month:
It is always interesting to see how the best and worst index each month is relatively random:
This randomness and reversion to the mean would suggest that Resource Stocks, which performed poorly in 2012, may be a good investment for 2013. During the course of 2012 the price of a barrel of crude oil dropped from $101.56 to $91.82. The Resource Stock index reported here is about 70% energy stocks.
Finally, here is the growth of two different asset allocations. The returns in May of Resource Stocks, Foreign Stocks and Emerging Markets caused problems for the full asset allocation verses the typical 60-40 allocation:
Here are the codes for the indexes used along with their full description:
- US Bonds: Barclays US Aggregate Bond Index
- Global Bonds: Barclays Global Aggregate Bond Index
- S&P 500: S&P 500 Composite Total Return
- R2000: Russell 2000 Small Cap Index
- EAFE: MSCI EAFE Index
- EM: MSCI Emerging Market Index
- Nat. Res.: S&P GSSI North American Natural Resources Index