Articles on investing and capital management, with a quantitative focus.

#prp - Permanent Risk Parity (how I invest)

Peeking at Asset Class Performance


I try to focus on my overall portfolio performance, but today I peeked at the individual asset classes to look at how they have performed since I began using this portfolio.

The time period is 7.7 years. Based on the government's CPI figures, inflation over this period has been approximately 3% annualized, with some very high inflation in the last three years. This performance is based on CAD currency, but USD-based returns are very similar.

Portfolio asset Nominal CAGR Real return
XIU: TSX 60 stocks (Canada) 8.9% +6%
ZSP: S&P 500 stocks (US) 13.2% +10%
XBB: bond market (Canada) 0.9% -2%
CGL.C: gold bullion 6.6% +4%

Bond performance has been terrible. It's the only asset class in the portfolio with a negative real return.

One should never extrapolate returns, because asset class performance is notoriously unpredictable. However, these results are what one would expect in a high-inflation period: pretty good returns in stocks and gold, but poor (negative) real returns in bonds.

Jem Berkes