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The performance and volatility of the 7Twelve Portfolio has been back-tested using actual funds as the 12 sub-assets from 1998-2007 (as reported in 7TwelveTM Accumulation Portfolio Performance).
The fundamental concept behind the 7Twelve portfolio has been tested over a 38-year period (from 1970-2007) using seven of the 12 core sub-assets: Large US equity, Small US equity, Non-US equity, Bonds, Cash, REITs, and Commodities. (These seven sub-assets have performance histories back to 1970.) Each sub-asset was equally weighted and annually rebalanced to an equal weighting at the start of each year. Taxes and inflation were not taken into account.
The 38-year historical performance of large cap US equities was represented by the S&P 500 Index, while the performance of small cap US equities was captured by using the Ibbotson Small Companies Index from 1970-1978 and the Russell 2000 Index from 1979-2007. The performance of non-US equities was represented by the Morgan Stanley Capital International EAFE Index (Europe, Australasia, Far East) Index. US intermediate term bonds were represented by the Ibbotson Intermediate Term Bond Index from 1970-73 and the Lehman Brothers Intermediate Government Bond index from 1974-2007.
The historical performance of cash was represented by 3-month Treasury Bills. The performance of real estate was measured by using the annual returns of the NAREIT Index (National Association of Real Estate Investment Trusts) from 1970-1977. (annual returns for 1970 and 1971 were regression-based estimates inasmuch as the NAREIT Index did not provide annual returns until 1972.) From 1978-2007, the annual returns of the Dow Jones Wilshire REIT Index were used. Finally, the historical performance of commodities was measured by the Goldman Sachs Commodities Index (GSCI). As of February 6, 2007, the GSCI became known as the S&P GSCI.
Portfolio Performance Prior to Retirement (Accumulation Period)
The equally weighted multi-asset portfolio (see far right column in the table below) had an average annual return over the 38-year period of 11.41% and a worst 1-year return of –5.48%. Even more impressive, its worst 3-year return was +2.43%. These performance figures assume a lump sum investment in 1970 and no additional investments or withdrawals.
In the pre-retirement "accumulation" period, the multi-asset portfolio had long-run performance comparable to stocks, REITs, and commodities, but with downside risk comparable to bonds or cash — a combination that represents the holy grail of investing.
| Average Annual % Returns |
| Year |
Large US Equity |
Small US Equity |
Non-US Equity |
Inter-
mediate
Term US Bonds |
Cash |
Real Estate |
Commodities |
Equally Weighted
Multi-Asset Portfolio |
| 1970 |
3.92 |
–17.40 |
–11.66 |
16.90 |
6.80 |
–4.00 |
15.17 |
1.39 |
| 1971 |
14.30 |
16.50 |
29.59 |
8.70 |
4.53 |
15.52 |
21.08 |
15.75 |
| 1972 |
19.00 |
4.40 |
36.35 |
5.20 |
4.24 |
8.01 |
42.43 |
17.09 |
| 1973 |
–14.69 |
–30.90 |
–14.92 |
4.60 |
7.46 |
–15.52 |
74.96 |
1.57 |
| 1974 |
–26.47 |
–19.90 |
–23.16 |
7.03 |
8.35 |
–21.42 |
39.51 |
–5.15 |
| 1975 |
37.23 |
52.80 |
35.39 |
8.33 |
6.08 |
19.29 |
–17.22 |
20.27 |
| 1976 |
23.93 |
57.40 |
2.54 |
11.74 |
5.23 |
47.56 |
–11.92 |
19.50 |
| 1977 |
–7.16 |
25.40 |
18.06 |
3.00 |
5.52 |
22.43 |
10.37 |
11.09 |
| 1978 |
6.57 |
23.50 |
32.62 |
2.23 |
7.67 |
10.98 |
31.61 |
16.45 |
| 1979 |
18.61 |
43.07 |
4.75 |
6.59 |
10.86 |
48.99 |
33.81 |
23.81 |
| 1980 |
32.50 |
38.60 |
22.58 |
6.65 |
12.71 |
33.12 |
11.08 |
22.46 |
| 1981 |
–4.92 |
2.03 |
–2.28 |
10.79 |
15.58 |
17.88 |
–23.01 |
2.30 |
| 1982 |
21.55 |
24.95 |
–1.86 |
25.42 |
11.66 |
20.91 |
11.56 |
16.31 |
| 1983 |
22.56 |
29.13 |
23.69 |
8.22 |
9.24 |
32.17 |
16.26 |
20.18 |
| 1984 |
6.27 |
–7.30 |
7.38 |
14.29 |
10.33 |
21.89 |
1.05 |
7.70 |
| 1985 |
31.73 |
31.05 |
56.16 |
18.00 |
7.97 |
6.50 |
10.01 |
23.06 |
| 1986 |
18.67 |
5.68 |
69.44 |
13.06 |
6.29 |
19.75 |
2.05 |
19.28 |
| 1987 |
5.25 |
–8.80 |
24.63 |
3.61 |
6.13 |
–6.59 |
23.77 |
6.86 |
| 1988 |
16.61 |
25.02 |
28.27 |
6.40 |
7.06 |
17.48 |
27.94 |
18.40 |
| 1989 |
31.69 |
16.26 |
10.54 |
12.68 |
8.67 |
2.72 |
38.28 |
17.26 |
| 1990 |
–3.10 |
–19.48 |
–23.45 |
9.56 |
7.99 |
–23.44 |
29.08 |
–3.26 |
| 1991 |
30.47 |
46.04 |
12.13 |
14.11 |
5.68 |
23.84 |
–6.13 |
18.02 |
| 1992 |
7.62 |
18.41 |
–12.17 |
6.93 |
3.59 |
15.13 |
4.42 |
6.28 |
| 1993 |
10.08 |
18.88 |
32.56 |
8.17 |
3.12 |
15.14 |
–12.33 |
10.80 |
| 1994 |
1.32 |
–1.82 |
7.78 |
–1.75 |
4.45 |
2.66 |
5.29 |
2.56 |
| 1995 |
37.58 |
28.45 |
11.21 |
14.41 |
5.79 |
12.24 |
20.33 |
18.57 |
| 1996 |
22.96 |
16.49 |
6.05 |
4.06 |
5.26 |
37.05 |
33.92 |
17.97 |
| 1997 |
33.36 |
22.36 |
1.78 |
7.72 |
5.31 |
19.66 |
–14.07 |
10.87 |
| 1998 |
28.58 |
–2.55 |
19.93 |
8.49 |
5.02 |
–17.01 |
–35.75 |
0.96 |
| 1999 |
21.04 |
21.26 |
27.03 |
0.49 |
4.87 |
–2.58 |
40.92 |
16.15 |
| 2000 |
–9.10 |
–3.02 |
–14.17 |
10.47 |
6.32 |
31.04 |
49.74 |
10.18 |
| 2001 |
–11.89 |
2.49 |
–21.44 |
8.42 |
3.67 |
12.35 |
–31.93 |
–5.48 |
| 2002 |
–22.10 |
–20.48 |
–15.94 |
9.64 |
1.68 |
3.58 |
32.07 |
–1.65 |
| 2003 |
28.69 |
47.25 |
38.59 |
2.29 |
1.05 |
36.18 |
20.72 |
24.97 |
| 2004 |
10.88 |
18.33 |
20.25 |
2.33 |
1.43 |
33.16 |
17.28 |
14.81 |
| 2005 |
4.91 |
4.55 |
13.54 |
1.68 |
3.34 |
13.82 |
25.55 |
9.63 |
| 2006 |
15.79 |
18.37 |
26.34 |
3.84 |
5.07 |
35.97 |
–15.09 |
12.90 |
| 2007 |
5.49 |
–1.57 |
11.17 |
8.47 |
4.77 |
–17.56 |
32.67 |
6.21 |
| 38-Year Average Annualized % Return |
| |
11.08 |
11.74 |
10.86 |
8.10 |
6.29 |
12.38 |
12.02 |
11.41 |
| 38-Year Standard Deviation of Annual Returns |
| |
16.62 |
21.68 |
21.54 |
5.39 |
3.07 |
18.45 |
23.93 |
8.60 |
| Number of Years with Negative Returns |
| |
8 |
11 |
10 |
1 |
0 |
8 |
9 |
4 |
| Worst 1-Year % Return |
| |
–26.47 |
–30.90 |
–23.45 |
–1.75 |
1.05 |
–23.44 |
–35.75 |
–5.48 |
| Worst 3-Year Cumulative % Return |
| |
–37.61 |
–42.22 |
–43.32 |
6.43 |
4.22 |
–28.30 |
–26.06 |
2.43 |
Past Performance is no guarantee of future performance.
An annually rebalanced, equally weighted, multi-asset portfolio produced superior risk-adjusted performance.
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