2021 investment results you should know

Sound Investing

In this review of 2021 investment results, Paul shares 10 lessons he thinks will be of interest to you following our advice.

1. How many up and down days did the market produce and how that compares to longer-term profitable vs. losing periods?

2. The market reached 70 new highs during the year. Is that good news or bad?

3. The biggest drawdown for the year was 5.1%. How does that compare to past years?

4. Commodities, oil and Bitcoin were among the big winners in 2021. But why do the reported returns of the S&P and other equity asset classes understate their actual returns?

5. Paul focuses on a short report from Dimensional Funds: When It’s Value vs. Growth, History is on Value’s Side https://www.dimensional.com/us-en/insights/when-its-value-versus-growth-history-is-on-values-side. This study highlights the high volatility in the difference between these two asset classes. Bottom line average advantage to value is more than 5%.

6. Sometimes investing results can be hard to explain. Paul reviews the 2021 small and large value and growth returns in U.S., international and emerging markets. Investors may be surprised to see the huge differences from what might be considered similar asset classes.

7. In our Best In Class ETF recommendations our Director of Research, Chris Pedersen, works hard to identify the ETFs that should be among the best. Paul reviews the results of his recommendations compared to the returns of the average ETF in each equity asset class.

8. Many investors struggle to make the decision Best In Class ETFs or all Vanguard all the time. Paul compares the returns of the BIC ETFs portfolios (U.S. 4 Fund, Worldwide 4 Fund and Worldwide All Value and more) to similar portfolios with Vanguard ETFs. Paul also compares BIC with similar DFA portfolios. Investors have to decide whether those differences will be similar in the future or 2021 was an aberration.

9. Many investors have chosen the Total Stock Market over the S&P 500. Paul discusses the reasons their historic returns are almost the same and why the S&P 500 way outperformed the TMI in 2021.

10. While equity is considered the gas for growth in a portfolio, bonds are considered the brakes. Paul explains why he doesn’t recommend international bonds to stabilize a portfolio and why international bonds lost more money than U.S. bonds in 2021.