Total Returns for the iShares Dow Jones Total Market Sector ETFs

I miss the days when total return information for various indexes were available for download. For some reason, companies have decided to take their information offline. For data nerds like me, this is hard to stomach.

I always liked to follow the sector returns for the Dow Jones Total Market Index. Fortunately, iShares has had exchange-traded funds for all ten of the sectors since mid-2000. That data is easy to find.

To calculate these returns, I used the adjusted closing price from Yahoo!.

By far the best performing ETF of the group over the last 15 years was the iShares Consumer Goods (IYK), which had an average annual ROR of 8.44%. The largest holdings in IYK is Proctor & Gamble, Coca-Cola, and Pepsico. This makes sense because consumer goods are usually defensive and hold up well during rough markets.

By far the worst performer over the same period was Telecom (IYZ), which returned only .68% per year. Ouch!

Graphic of the Day – Calculating the Cost of an Exchange-Traded Fund

This is pretty cool (click on the graphic to see a larger version):

Calculating the True Cost of an ETFSource: WSJ

There is more to be considered when selecting an ETF than just the expense ratio. Spreads and brokerage commissions can take a large chunk out of the returns (if there are any).

iShares Introduced Some New Low-Cost Exchange-Traded Funds

I read yesterday that iShares is introducing some low-cost ETFs (I couldn’t locate the piece I read yesterday so I found something close to what I originally read) to compete with Vanguard. One of the new ETFs is iShares Core MSCI EAFE ETF (IEFA), which will have an expense ratio of 0.14 percent. What’s interesting about this is iShares already has an ETF based on the EAFE (EFA). Why didn’t they just lower the expenses on that ETF instead of creating a whole new ETF? According to one article I read, the new EAFE-based ETF will have a slightly “investable markets” which, according to Barron’s “include a bigger helping of smaller stocks and tend to track more stocks altogether.”

My theory is that iShares simply didn’t want to give existing EFA holders a fee break. It’s much better for iShares to make investors do something (sell EFA and buy IEFA) and incur some costs rather than just lower the fees associated with the EFA.

Comparing the Monthly Performance of Three S&P 500 ETFs

I thought it might be interesting to look at the monthly performance of three different exchange-traded funds that track the S&P 500 Index (iShares S&P 500 Index ETF (IVV), SPDR S&P 500 Index ETF (SPY), and Vanguard S&P 500 Index ETF (VOO)). The newest ETF of the bunch is Vanguard’s VOO, which has monthly return data going back to October 2010. I used that month as the basis for the comparison.

Of the three ETFs, VOO has the lowest expense ratio of .05% compared to .09% for IVV and SPY.

To calculate the returns, I downloaded the data from Yahoo! Finance and used the Adjusted Closing Price, which adjusts the price for dividends and splits.

Here’s what I found:

Comparing the Monthly Performance of IVV, SPY, and VOO

The performance differences were very close between the three. The best performing ETF of the three was iShares. Keep in mind that these numbers do not reflect transaction charges (brokerage fees and such).

Annual Review of the AFM iShares Retirement Portfolio

I have been tracking a retirement portfolio for several years here at AFM. It’s split 30/20/50 between domestic stocks, international stocks, and fixed income, respectively. The domestic stock portion is invested evenly in the 10 sector exchange-traded funds that make up the Dow Jones Total Market Index. The international stock portion was invested in the iShares MSCI EAFE Index Fund from 2004 through 2009 when it was replaced with the iShares MSCI All World (excluding the U.S.) Fund (ACWX). The fixed income portion was represented by the iShares Lehman Aggregate Bond Index Fund (AGG) and iShares Goldman Sachs Investop Corporate Bond Index Fund (LQD) from 2004 – 2008 when the iShares S&P/CitiGroup International Treasure Index Fund (IGOV) was added.

So, here is how the portfolio performed over the years:

As you can see, 2008 was a tough year. The entire portfolio was down 16.75% that year. The domestic equity portion lost 36.99%, the international equity portion was down 40.50%, and the fixed income portion was up 4.89%.

I’ll provide a PDF of the year-by-year portfolios in a follow-up.

Update on the Israelsen 7Twelve Portfolio

I have been meaning to post an update on the 7Twelve Portfolio but haven’t done so this year. Here are the latest numbers as of this morning’s prices (you can click on the graphic to view a PDF version):

For those of you not familiar with the 7Twelve Portfolio, I would suggest you start here:

An Introduction to the 7Twelve Portfolio

10 Questions for Craig Israelsen, Author of “7Twelve”

The 7Twelve Portfolio’s Performance for 2010