Looking for historical returns simple portfolios containing stocks + fixed income

Discussion in 'Educational Resources' started by achab, Nov 6, 2011.

  1. achab


    A few years ago, I found an article that, among other information, had historical returns of a stocks only portfolio, a stocks + CDs portfolio and a stocks+bonds portfolio. A few days ago, I spent an hour trying to find it again by googling for it, but didn't find it.

    Do you know of any article that includes the above information, with some level of details on how those returns were measured (over what historical period, did they use an index fund, etc.) ? I am preparing a introductory investing course, and want to show how a wise asset allocation of stocks (~10% return) and CDs (~2% return), combined with rebalancing, produces a higher return than stocks alone. Same thing for stocks (~10%) combined with bonds (~ 6%) producing a higher return than stocks alone. Some investor wannabes don't get that simple concept, so I want to backup those statements with as solid data as possible.

    I am looking for articles with numbers. Most of what Google came up with this time are articles with Shakespearean verbiage only, which makes me hit the back button on my browser real fast.

    The concept I want to teach them is what is explained on page 82 of
    http://books.google.com/books?id=IS...ion" rebalancing "volatility pumping"&f=false
    under the heading "Getting Your Free Lunch with Rebalancing". But I don't like their example of 1975 through 2004, in which stocks return 13.7%. Also, they use REIT as fixed income, and I would like to find data for when CDs or bonds are used as fixed income. In the article I found a few years ago, which looked at much larger time interval, it was more like around 10% for stocks, around 11% for stocks+CDs, and around 12% or 13% for stocks+bonds.

    I am looking for the simplest possible examples. Examples such as the following:
    a) 90% S&P 500, 10% cash, rebalance every 6 months.
    b) 80% S&P 500, 20% CDs, rebalance every 6 months.
    c) 60% S&P 500, 40% bond fund, rebalance every 6 months.

    In lieu of an article, if you are already setup to do back testing and can back test the above in 10 minutes or less, would you please tell me which of the above 3 simple portfolios, or an alternative SIMPLE portfolio, beats the S&P 500 over a LONG period of time (LONG as in 100 years or so). Please include the date range you used. Ideally, the range will end the day before you run the test (just to make it random).

    Thank you,