Model Mutual Fund and ETF Portfolios: Choosing a Benchmark Isn't Easy

by James B. Cloonan

Model Mutual Fund And ETF Portfolios: Choosing A Benchmark Isn't Easy Splash image

Through March, the 2012 equity market has been a friendlier place than we have seen for a while.

The S&P 500 index was up 12.5%, as measured by the Vanguard S&P 500 Index fund (VFINX). This is somewhat better than our Model Mutual Fund Portfolio at 10.0% and our portfolio of exchange-traded funds (ETFs), the Model ETF Portfolio, at 10.9%. Tables 1 and 2 show the longer-term performance of the Model Mutual Fund Portfolio, and Tables 3 and 4 sho

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James B. Cloonan is founder and chairman of AAII.


Thomas from Massachusetts posted about 1 year ago:

Looking at the small cap mutual funds NOSGX and PENNX, both Yahoo and Google finance show much lower results that your table above. The annual five and ten year returns are as follows:
NOSGX: -1.0, +3.3
PENNX: -1.0, +4.0

Am I misreading something?

Jean from Illinois posted about 1 year ago:

Thomas - The column we had marked as "10-Year Return" should read "Since 6/30/03," and we are making that change. Sorry for the confusion. As for the 5-year returns, I see 2.4% for NOSGX and 3.27% for PENNX at Yahoo! and Google (data from Morningstar), matching our figures. Ten-year returns on Yahoo! and Google for these 2 funds are: NOSGX = 7.8%; and PENNX = 8.24%. Jean at AAII

Thomas from Massachusetts posted about 1 year ago:

Thanks Jean. I think the difference in the 5-year returns is because I calculated the returns from the charts which don't include dividends.

Raymond from Arkansas posted about 1 year ago:

Just learned today that AMLP is registered as a corporation and not as an MLP. Am now wondering if the 0.85 expense ration can be justified.

Peter from Maryland posted about 1 year ago:

Is there a reason why the mutual fund portfolio doesn't include an international fund? The ETF does, and several past article in the AAII Journal said that an international exposure would enhance performance and reduce risk.
What am I missing?

Aaii from Illinois posted about 1 year ago:

Thank you for your comment. We are making some changes in the Mutual Fund and ETF portfolios in August and the subject of international diversification will be examined more carefully. In general it appears that foreign index funds provide less return than similar domestic funds and that the diversification produces only very short term risk reduction. Obviously some foreign funds, such as emerging market funds, provide excellent returns but in general they do not have the promised benefits. We would always consider a foreign fund on the same basis as domestic funds but would not include it just because it was foreign. -James Cloonan

Nick from New Jersey posted about 1 year ago:

Few domestic mutual stock fund do invest in foreign country. So i guess exposure and risk is involved.Can we know how much is that exposure from current portfolio

Richard Gillman from California posted about 1 year ago:

Why is there not a "Weight in Portfolio" column for the Model Mutual Fund Portfolio. I'm new here.


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