First Objective: Grow Money

As shown in the table below, over the 10-year period from 1998 to 2007, a $10,000 lump sum investment in the 7Twelve portfolio grew to $29,796 (not considering taxes and inflation). The same investment in the American Funds Capital Income Builder fund (a broadly diversified fund with net assets in excess of $110 billion) grew to $26,074. The Fidelity Global Balanced fund (a "world allocation" fund with $380 million in assets) turned $10,000 into $24,447, while the T. Rowe Price Personal Strategy Balanced fund (with assets over $1.5 billion) turned a $10,000 investment into $20,982. The $9.8 billion Vanguard Balanced fund (a less diversified fund that invests only in US stock and US bonds) turned $10,000 into $18,717.

Finally, a $10,000 investment in the Vanguard 500 Index (a $122 billion fund that mimics the S&P 500 Index by investing in 500 US companies) grew $10,000 into $17,624 over the 10-year period. It has the least diversified portfolio in this group of comparison funds.

Over the 10-year period from 1998-2007, the 7Twelve portfolio had an average annualized return of 11.54%, well ahead of the other five funds in this comparison. The more diversified each comparison funds is (as noted by its asset allocation among US stock, non-US stock, bonds, cash, and "other"), the closer its return was to the 7Twelve portfolio. For rolling 3-year returns, click here.

Here is a broader comparison. There were 1,979 distinct mutual funds with at least 10 years of performance as of December 31, 2007. The term "distinct" indicates that only the primary share class was counted. All 1,979 funds had to have at least 50% of their portfolio in stock (US and/or non-US equity) as of 12/31/07. The average 10-year annualized return of this group was 8.18% with an average 10-year standard deviation of return of 21.4%. The 7Twelve portfolio had a higher 10-year return than 84% of the 1,979 funds. However, with a standard deviation of return of 8.56% (a common measure of risk) the 7Twelve portfolio had lower risk than over 98% of the 1,979 funds.

Second Objective: Protect Money by Avoiding Losses

The best way to both grow and protect money is to avoid losses, particularly large losses. Between 1998 and 2007, the worst 1-year return in the 7Twelve portfolio was 0.10%. The worst 1-year return in the American Funds Capital Income Builder fund was –2.78%, while the Fidelity Global Balanced Fund had a return of –8.15% in its worst year (2001). The T. Rowe Price Personal Strategy fund had a worst 1-year return of –7.74% in 2002. The Vanguard Balanced fund had a return of –9.45% in 2002. Finally, Vanguard 500 Index fund had a return of –22.15% in 2002.

Back to the larger comparison. Of the 1,979 funds previously mentioned, only six funds avoided a negative annual return during the full 10-year period from 1998-2007. In other words, 99.7% of the 1,979 funds had at least one year with a negative return. In fact, the average number of negative annual returns over the 10-year period was three (and they typically occurred in 2000, 2001, and 2002).

7Twelve^TM Accumulation Portfolio Performance
Compared to Five Funds

Performance assumes equally weighting each sub-asset and annual rebalancing on January 1 of each year to original portfolio allocations. Taxes and inflation were not accounted for. Raw data used in the study were obtained from Morningstar Principia and other sources.

Calendar Year Total % Return	Master 7Twelve	American Funds Capital Income Builder A (CAIBX)	Fidelity Global Balanced (FGBLX)	T. Rowe Price Personal Strategy Balanced (TRPBX)	Vanguard Balanced Fund (VBINX)	Vanguard 500 Index (VFINX)
1998	0.10	11.75	17.75	13.90	17.85	28.62
1999	15.47	–2.78	23.03	7.96	13.61	21.07
2000	12.26	12.52	–5.97	5.60	–2.03	–9.06
2001	2.17	4.75	–8.15	–2.49	–2.98	–12.02
2002	2.31	0.65	–6.15	–7.74	–9.45	–22.15
2003	28.61	21.57	29.90	24.38	20.02	28.50
2004	17.46	17.40	3.67	2.55	.37	0.74
2005	12.31	4.94	9.00	6.44	4.80	4.77
2006	15.13	22.04	13.70	11.92	11.06	15.64
2007	12.46	10.68	13.77	7.70	6.31	5.39
Portfolio Allocations (December 31, 2007)
% in US Stock	29.6	27.0	21.1	49.8	60.4	99.6
% in Non-US Stock	29.7	38.5	32.2	15.7	0.1	0.0
% in Bonds	25.9	19.3	27.6	29.2	37.7	0.0
% in Cash	14.0	14.5	9.1	2.3	1.8	0.3
% in Other	0.8	0.8	9.9	3.0	0.0	0.0
10-Year Average Annualized Return*	11.54	10.06	9.35	7.69	6.47	5.83
10-Year Standard Deviation	8.56	8.47	12.97	8.85	9.49	17.30
Worst 1-Year % Loss	0.10	–2.78	–8.15	–7.74	–9.45	–22.15
Correlation to S&P 500 Index	0.50	0.44	0.94	0.89	0.97	1.00
10-Year Growth of $10,000	$29,796	$26,074	$24,447	$20,982	$18,717	$17,624
Annual % Expense Ratio of Portfolio	0.69	0.56	1.18	0.79	0.20	0.18
5-Year Tax Cost Ratio (Lower is better)	1.21	1.62	1.41	1.14	0.77	0.29
*Average annualized return is a geometric mean, not an arithmetic mean.