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A Look at the Dow Jones Total Market Index Sector Performance
By JLP | January 29, 2007
I remember seeing a periodic table of Dow Jones Total Market Index sector returns a few years ago but now I can’t find it anywhere. So, I decided to build my own. I downloaded all the historical data from DJIndexes.com, computed the total returns in Excel, ranked the returns for each year, and converted my findings into this PDF (which you can click on to view in a new window):
Here’s some interesting facts I found after conducting my research:
- Had you been able to invest $10,000 in each sector* on January 2, 1992 and left it alone over the last 15 years, the account would have been worth $478,353 on December 29, 2006. This would have given you an average total return of 10.9984%.
- Had you been able to invest $10,000 in each sector on January 2, 1992 and rebalanced at the end of each year, so that each sector always stayed at 10% for the next year, the account would have grown to $518,264 for an annualized return of 11.5929%.
- The best performing sector over the last 15 years was Financials with an annualized return of 15.36%, followed by Oil & Gas at 14.27%.
- The worst performing sector over the same time period was Telecommunications with an annualized return of just 6.56%.
The cool thing about the Dow Jones Total Market Index is that investors can invest in each sector or the total index itself via exchange-traded funds through iShares. In fact, my next little project will be to analyze the ETFs for the DJ Total Market Index to see how they compare with the index itself.
*NOTE: It is important to note that I am analyzing the actual index. That means no management expenses or trading fees have been deducted from these results.
Topics: Investing |
January 29th, 2007 at 5:27 pm
Wow. Those first two results are pretty interesting. So the conclusion is that a periodic rebalancing is usually a good thing.
I wonder if you could simulate the same results with different periods of rebalancing? E.g., every 6 months, 3 months, 2 years, 5 years? Obviously an overly long rebalancing period would bring the results down to the non-rebalanced level, but I think rebalancing too often would be equally harmful. It’d be really interesting to see if there’s an “ideal” rebalancing period.
January 29th, 2007 at 5:39 pm
Gaming,
I haven’t run the numbers but I don’t think rebalancing more often would make that much difference, aside from making life rough due to all the activity.
January 29th, 2007 at 7:27 pm
Those sector performance charts are telling. It shows that diversification is the best method.
February 1st, 2007 at 11:11 pm
[...] Earlier this week I posted the Dow Jones Total Market Index Sector Performance for 1992 - 2006. This was the performance of the actual index sectors, which to my knowledge weren’t available for people to invest in until iShares came along and started offering the ten sectors as exchange-traded funds in the summer of 2000. Below are the total returns for the ten sectors of the Dow Jones Total Market Index along with the Total Market Index Fund (IYY) which includes all ten sectors: [...]
February 2nd, 2007 at 9:01 am
[...] Dow Jones Total Market Index Sector Performance - JLP has put together a nice “periodic table” of the performance across the Dow Jones sectors. I always find these an interesting way to illustrate how important it is to diversify. [...]