Portfolio Update: One Year Results

If you invested on May 1st, 2007, and you followed the conventional wisdom in fund investing these days which is to invest in index funds instead of managed funds, a year later, you might have have found yourself sitting on a loss instead of having made money.

And had you bought ETFs, generally the least expensive indexing option, your loss could have even more painful.

On May 1st 2007, I picked 20 mutual fund categories- ranging from Large Cap Growth to Inflation Protected Bonds to Emerging Markets. Then I hypothetically invested $2500 in funds I picked (available through Etrade with low initial investment minimums), Vanguard Funds (picking index options when available) and ETFs, in each of the 20 categories. I also invested in three Vanguard Index funds, matching the same percentage of Domestic equity, Foreign equity and Bonds as the other $50,000 portfolios.

I set up these hypothetical portfolios in the free portfolio tracking tool available at morningstar.com.

You can read more about this experiment here.

As of the close of trading on the last day of April, 2008, only the portfolio I picked avoided losing money. The WylieMoney Slowly portfolio has gained a hand picked fund in a new category each month and is also in the black. I have learned from my experiment and migrated many of my non-retirement investments into many of the funds I researched and my brokerage is also in positive territory.

If you had simply invested in the S&P 500, you would be sitting on a loss 0f -5.69%. Had you stuck $50,000 in a nice savings account, you would have beaten all of these portfolios.

The difference is not great, but I must admit that I am a little surprised that after a year, the funds I picked, outperformed all the index options. That the performance is the difference between making money and losing money is even more unexpected.

Here are the details (click on each image for a larger view):

WylieMoney 20 Mostly Managed

WylieMoney Slowly

My Brokerage

Three Fund Index

Lazy 20 Mostly Index

ETF 20

Combined IRAs

S&P 500

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