Annual Returns Annual Portfolio Returns (Stock Weighting at Top)

Year S&P 500 VBIIX 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
1994 1.32% -2.88% 1.32% 0.90% 0.48% 0.06% -0.36% -0.78% -1.20% -1.62% -2.04% -2.46% -2.88%
1995 37.58% 21.07% 37.58% 35.93% 34.28% 32.63% 30.98% 29.33% 27.67% 26.02% 24.37% 22.72% 21.07%
1996 22.96% 2.55% 22.96% 20.92% 18.88% 16.84% 14.80% 12.76% 10.71% 8.67% 6.63% 4.59% 2.55%
1997 33.36% 9.41% 33.36% 30.97% 28.57% 26.18% 23.78% 21.39% 18.99% 16.60% 14.20% 11.81% 9.41%
1998 28.58% 10.09% 28.58% 26.73% 24.88% 23.03% 21.18% 19.34% 17.49% 15.64% 13.79% 11.94% 10.09%
1999 21.04% -3.00% 21.04% 18.64% 16.23% 13.83% 11.42% 9.02% 6.62% 4.21% 1.81% -0.60% -3.00%
2000 -9.10% 12.78% -9.10% -6.91% -4.72% -2.54% -0.35% 1.84% 4.03% 6.22% 8.40% 10.59% 12.78%
Total Return 223.37% 58.89% 223.37% 203.98% 185.19% 167.03% 149.52% 132.69% 116.54% 101.08% 86.32% 72.25% 58.89%
Avg. Return 18.25% 6.84% 18.25% 17.21% 16.15% 15.06% 13.95% 12.82% 11.67% 10.49% 9.30% 8.08% 6.84%
Std Dev. 17.15% 8.79% 17.15% 15.75% 14.40% 13.11% 11.92% 10.85% 9.94% 9.24% 8.79% 8.64% 8.79%
Correlation 33.10%

This table shows how risk and return vary as we mix stocks and bonds. The key things to notice are:

1) This riskiest portfolio, 100% stocks, also has the highest return. As we mix in bonds, the return drops, but
the risk drops even more.
2) Compare the 60% stock/40% bond mix (an oft recommended mix) to 100% stocks. Note that the you gave
up 4.30% per year, but you gave up 5.22% on the standard deviation (risk).
3) Now compare the all bond portfolio to the 60/40 mix. Compared to all bonds, you got an extra 7.12% per
year in return and took on only an extra 3.13% in standard deviation.
4) Over the entire 7-year period, you would have earned and additional 90.64% with the 60/40 mix compared
to 100% in bonds.

Notes:
VBIIX 1994 performance is from 3/01/1994 which was the inception date
S&P 500 performance is total returns including dividends, source: http://www.spglobal.com/mktattrib.html
VBIIX is total return, source: http://www.vanguard.com
Suppose you chose one of these stock/bond portfolios and invested $2,000 at the beginning of the year for an entire 30-
year period. How much would you have in your account at the end of this time?

Note: This period of time was unusual for its very high returns, but the differences in the totals is still instructive.

% in Stocks Total After 30 Years

100% $1,664,492.51
90% $1,351,390.46
80% $1,092,799.97
70% $880,491.76
60% $707,167.35
50% $566,430.46
40% $452,736.73
30% $361,329.20
20% $288,165.44
10% $229,841.24
0% $183,514.36
year for an entire 30-

still instructive.
 S&P 500 and VBIIX Annual Returns
40.00%
37.50%
35.00%
32.50%
30.00%
27.50%
25.00%
22.50%
20.00%
17.50%
Return

15.00%
12.50%
10.00%
7.50%
5.00%
2.50%
0.00%
-2.50%
-5.00%
-7.50%
-10.00%
1994 1995 1996 1997 1998 1999 2000
Year
2000
 Risk and Return of Various Stock/Bond Combinations
19.00%
18.00%
17.00%
16.00%
15.00%
14.00%
13.00%
12.00%
11.00%
Return

10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Column D Column E Column F Column G Column H Column I Column J Column K Column L Column M Column N
Standard Deviation
Column N