These portfolios beat 99% of all portfolios for 2008

Posted Jan 2nd 2009 5:40PM by Daniel Solin

The portfolios that beat 99% of all portfolios for 2008 really are unique. Their proponent does not have clue about market timing, stock picking or manager picking. They are available without using any broker or advisor;

They involve the purchase of three low cost index funds.

A recent study found these simple portfolios beat the passive portfolios of Scott Burns, David Swenson, William Bernstein, Ben Stein and Andrew Tobias. I am quite confident that they beat 99% of actively managed portfolios of comparable risk as well.

Here are the 2008 returns and risk for these portfolios:

	Return	Risk (measured by standard deviation)
Low Risk :	-3.79	6.92%
Median Low Risk:	-12.63	8.85%
Medium High Risk:	-21.47	11.66%
High Risk:	-30.32	14.86%

The three mutual funds are all Vanguard index funds: The Total Stock Market Index Fund (MUTF: VTSMX), The Total International Stock Index Fund (MUTF: VGTSX) and The Total Bond Index Fund (MUTF: VBMFX).

What's the point?

In bull and bear markets, broadly diversified, low cost portfolios of index funds will likely outperform actively managed funds. The securities industry has a vested industry in keeping this information from you.

You need to fundamentally change the way you invest.

And yes, these are the portfolios I recommended in The Smartest Investment Book You'll Ever Read.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).

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Reader Comments (Page 1 of 1)

1-06-2009 @ 2:55PM

Stephen Zimmett said...

I'm wondering if an investment such as RiverSource Retirement Advisor 4 Advantage
Variable Annuity would be a good investment.
We have about $36,000 to invest and the claim is that it returns a solid 6% return.
We should be able to withdraw from it any time we wish, to 10%.
My wife and I just reached 60 so I'm wondering if an annuity would be a good investment, considering our age?
This money is all IRA funds.
Thanks for any help.