Happy New Year! The year 2006 was a great one for equity investors around the world as stock prices rose in 46 of the 50 countries whose equity market returns are reported by MSCI. Among these, only Israel,Jordan,Thailand, and Turkey saw their local stock market indexes slump for the year. The 2006 return for US stocks was 15.32% according to MSCI, placing it next-to-last among 23 developed markets (in dollar terms) and 42nd out of 50 countries in all. There were 36 markets with a total return greater than 20% (in dollar terms), and 19 had a total return greater than 40%. Nine of the top ten were emerging markets. So, the “moral of the story” is that international diversification can pay big rewards while reducing portfolio risk! In fact, international asset classes significantly outperformed their U.S.counterparts over the last five years.
The following chart shows the 1-year, 5-year, and 10-year performance of many DFA funds (representing different asset classes) compared to the S&P 500 Index:
|
DFA Fund / Index |
1 Year Return (Period Ending 12/31/06) |
5 Year Return* (Period Ending 12/31/06) |
10 Year Return* (Period Ending 12/31/06) |
| S&P 500 Index |
15.80 |
6.19 |
8.42 |
| DFA U.S.Large Value |
20.18 |
12.37 |
11.92 |
| DFA U.S.Micro Cap |
16.16 |
15.16 |
13.48 |
| DFA U.S.Small Cap Value |
21.55 |
18.90 |
15.84 |
| DFA Real Estate (REITs) |
35.26 |
23.35 |
15.17 |
| DFA Int’l Large |
24.86 |
14.46 |
7.93 |
| DFA Int’l Large Value |
34.15 |
22.26 |
11.58 |
| DFA International Small |
24.88 |
26.40 |
10.63 |
| DFA Int’l Small Value |
28.39 |
30.30 |
12.90 |
| DFA Emerging Markets |
29.17 |
25.88 |
10.16 |
| DFA 2-Year Global Bonds |
4.46 |
2.85 |
4.36 |
| DFA 5-Year Global Bonds |
3.89 |
4.33 |
5.45 |
*Note: Returns for periods greater than 1 year are annualized. Top 3 returns are in bold.
