Saturday, January 29, 2005

Single Year 2004 Risk/Return


2004 was a trophy year for the portfolios of disciplined asset allocators and the relative risk/return alignment and similarity to long term expectations explains it. The general shape of the "efficient frontier" and the risk/reward relationships (and even many similar absolute values) of asset classes in 2004 was very similar to many long term forecasts. As forecast, the majority of peripheral risky asset classes were big producers. International developed equity as measured by the MCSI EAFE Index returned 20.7%, while emerging equity per the MSCI Emerging Markets Index returned over 25.6%. Real Estate was the best performing domestic asset class returning over 30%. High yield bonds provided a generous 10.9% return and International Bonds delivered over 9% on a US dollar basis while emerging market bonds gained over 12%. This is in stark contrast to the 6-7 years prior to 2003. See the Next Post


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