Another Great Year for VSG Portfolio and Summary of Global Market Indexes in 2013

2013 was quite some year in the markets. If you believed the market to be too expensive at the end of 2012 and sat this year out, you have missed a banner year the likes of which do not come across often.

We enjoyed another excellent year with the Value Stock Guide portfolio, comfortably outpacing the major indices. However, it should be pointed out that as the year progressed, we turned increasingly defensive. Great values were hard to come by and the cash levels in the portfolio have risen, currently sitting at about 24%. Occasionally we flirted with opportunistic investments, that worked out well but these definitely mean I have had to dig deeper to find them. I do find some nice investments even now but patience is definitely a skill that is getting exercised more and more.

As you go through the following tabulation of index returns, you will find that in 2013,

  1. Smaller stocks continued their supremacy over other asset class, but,
  2. Growth stocks outperformed Value

United States was a pretty good place to have your money invested in. Other developed countries did quite well too. Whether this continues in 2014 is anyone’s guess, but looking at the valuations today, I would not bet too much on it. Increasingly, better values are to be found overseas in emerging markets.

Lets start with the major US broad market indices. From this year, I am focusing on S&P and Russell indices as I do not consider Dow Jones and Nasdaq indices offer any additional insight that can not be gained through S&P and/or Russell.

US 2013 Total Returns (%) Core Growth Value
Value Stock Guide 38.30    
Broad Market Indices      
S&P 1000 35.87    
S&P 900 32.48    
S&P Composite 1500 32.80    
S&P Total Market Index 33.40    
Russell 3000® 33.55 34.23 32.69
Large Cap Indices      
S&P 100 30.39    
S&P 500 32.39    
Russell 1000® 33.11 33.48 32.53
Russell Top 200® 32.41 32.66 32.14
Russell Top 50® Mega Cap 29.16    
Mid Cap Indices      
S&P 400 33.50    
Russell Midcap® 34.76 35.74 33.46
Small Cap Indices      
S&P 600 41.31    
Russell 2000® 38.82 43.30 34.52
Russell 2500™ 36.80 40.65 33.32


We have underperformed the small cap indices, but mostly to the growth component. We outperformed ALL other asset classes and related indices in the US, whether blended, value or growth. All the returns shown here are Total Returns that include dividends. Value Stock Guide portfolio returns are net of commissions, while index returns are not adjusted for commissions. Please also note that for most of the year, we averaged better than 20% of our assets in cash, while indices by definition have nothing in cash (so when you look at a portfolio containing any funds tracking these indices, you will need to add the drag due to cash/bond component of your portfolio to make it apples to apples comparison with VSG portfolio).

2013 was the sort of year that makes average investors get carried away with excitement and hopes of the streak never ending. 2013 was the sort of year that makes investors like me really nervous. As asset values inflate, the risk rises. The secret to great portfolio performance is to focus on controlling risks and not worrying too much about potential returns. With this in mind and the valuations I see in the US markets, my interests are now shifting overseas. In 2013, we made one overseas investment and will probably make many more in the 2014. As usual, all these investments can be purchased on the US exchanges in the form of ADRs or similar vehicles.

Following is a listing of Russell global indices and their performance in the past year. A careful review of this might uncover certain trends that may be useful for your investment decisions in the new year.

Index name Core Growth Value
Russell Global 24.4 22.7 26
Russell Global Large Cap 24.3 22.5 26.1
Russell Global SMID 24.9 23.3 26.2
Russell Global Small Cap 25.2 25 25.4
Russell Global ex-US 16.8 13.2 20.4
Russell Global ex-US Large Cap 16.7 12.9 20.4
Russell Global ex-US Small Cap 17.6 15 20.2
Russell Global ex-North America 17.7 14.1 21.3
Russell Global ex-Japan 24.2 22.6 25.8
Russell Global ex-US ex-Japan 15.2 12.5 18.3
Russell Global ex-UK 24.4 22.5 26.1
Russell Global ex-Canada 25.2 23.7 26.7
Russell Global ex-Australia 25.1 23.5 26.5
Russell World Cap 24.8    
Russell Developed 28.4 28.1 28.5
Russell Developed Large Cap 28.1 27.7 28.4
Russell Developed Small Cap 30.8 33.2 28.8
Russell Developed ex-US 22.6 20.3 24.4
Russell Developed ex-US Large Cap 22.4 20 24.4
Russell Developed ex-US Small Cap 24.1 23.5 24.5
Russell Developed ex-North America 24.6 22.9 25.9
Russell Developed ex-North America Large Cap 24.3 22.4 25.8
Russell Developed ex-Japan 28.5 28.2 28.6
Russell Emerging Markets 0.2 -0.6 0.8
Russell Emerging Markets Large Cap -0.7 -1.4 -0.7
Russell Emerging Markets Small Cap 5.6 4.2 7.7
Russell BRIC -0.7 1.5 -5.5
Russell Global REIT 2.4    
Asia Pacific      
Russell Asia Pacific 12.8 7.1 17.7
Russell Asia Pacific ex-Japan 5.1 3.8 7.1
Russell Asia ex-Japan 5.3 4.4 6.2
Russell Greater China 11.6 13.1 9.8
Russell Greater China Large Cap 10    
Russell Greater China Small Cap 20.8    
Russell Developed Pacific Basin 18.4 12.8 20.2
Russell Developed Pacific Basin ex-Japan 5.5 5.1 6.1
Russell Emerging Asia 4.8 3.1 7.4
Russell Australia High Dividend 7.6   6.3
Russell Australia High Dividend (AUD) 24.9   23.3
Russell Europe 26.1 25.2 27.4
Russell Europe ex-UK 26.7 25.5 28.3
Russell Eurozone 30.6 28.2 32.6
Russell Developed Europe 27.9 26.7 29.5
Russell Developed Europe Large Cap 27    
Russell Developed Europe Small Cap 39.9    
Russell Developed Europe SMID 34.6    
Russell Europe SMID 300 (EUR) 27.1    
Russell Europe SMID 300 32.9    
Russell Europe SMID 300 (GBP) 30.4    
Russell Europe SMID 300 (CHF) 29.1    
Russell Developed Europe ex-UK 29.3 27.8 31.3
Russell Developed Eurozone 30.4 28.2 32.4
Russell Developed Eurozone SMID 35.1    
Russell Eurozone SMID 150 (EUR) 25.6    
Russell Eurozone SMID 150 31.3    
Russell Eurozone SMID 150 (GBP) 28.9    
Russell Eurozone SMID 150 (CHF) 27.6    
Russell Emerging Europe -1.5 0.3 -3.7
Russell Emerging Europe Large Cap -2.9    
Russell Emerging Europe Small Cap 10.2    
Russell Emerging EMEA -0.2 0 -1.2
Russell UK MID 150 (GBP) 33.1    
Chi-X Europe Russell PanEurope (EUR) 20.7    
Chi-X Europe Russell Eurozone (EUR) 23.6    
Chi-X Europe Russell PanEurope60 (EUR) 18.2    
Chi-X Europe Russell Eurozone40 (EUR) 21.8    
Russell Latin America -13.6 -12.1 -17.5


Interestingly, we got beat by the Russell Developed Europe Small Cap Index, in line with the Small Cap performance in US. We bettered every other major broad global index. This listing adds to my belief that better returns in 2014 can be found overseas, specially in the emerging markets.

Last year I compared the VSG performance to the returns generated by the hedge funds in 2012. This year I do not wish to get into this comparison at all as at some point you realize that the comparison is pointless.

Wish You All a Happy New Year and Above Average Returns in 2014!


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