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Investing Specialists

How Did the Retirement Saver Portfolios Perform in 2019?

As stocks soared, so did the equity-heavy Aggressive Mutual Fund and ETF portfolios.

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For investors, years like 2019 are ones to savor, but not to grow accustomed to. 

After a dismal 2018 in which recessionary worries pummeled stocks in the fourth quarter, stocks came roaring back to life last year as economic worries abated. The S&P 500 gained more than 30% during the year, and foreign markets performed well, too. (The only reason most foreign stock funds didn't perform as well as U.S. last year was that the dollar gained ground relative to most foreign currencies, hurting foreign funds because their securities are typically denominated in non-U.S. currencies.

Bonds also cooperated, thanks to a Goldilocks-type environment in which the economy was strong but not so robust as to prompt interest-rate or inflationary jitters. Long-duration bonds soared as yields declined, and lower-quality bonds were buoyed by positivity over the health of the economy. 

Thanks to those near-ideal conditions, the mutual fund and ETF Retirement Saver portfolios all enjoyed solid gains that ranged from 26% for the Aggressive ETF Retirement Saver portfolio to about 17% for the Conservative Mutual Fund version.

The mutual fund and ETF portfolios are designed to have similar risk profiles; for example, the asset allocation of the Moderate Mutual Fund portfolio is roughly in line with that of the Moderate ETF portfolio. Nonetheless, the ETF portfolios all outperformed their mutual fund counterparts last year, thanks largely to the heavy weighting of a total stock market index ETF in the ETF portfolios. 

Yet even as robust markets boosted the model portfolios and plumped balances, it’s also an ideal time to revisit a portfolio’s allocations. After all, markets as uniformly strong as 2019’s don’t often repeat themselves, and some segments of the stock and bond markets performed better than others. For investors getting close to retirement, revisiting asset allocation is key, as their portfolios have likely grown more aggressive even as their spending horizons have shrunk. For younger investors, intra-asset-class repositioning (from growth to value, for example, or U.S. to non-U.S) makes sense, as the contents of their portfolios have likely shifted around a bit. 

Aggressive Mutual Fund Saver Portfolio
20% Primecap Odyssey Growth (POGRX)
20% Oakmark Fund (OAKMX)
15% Vanguard Extended Market Index ((VEXAX)
33% Vanguard Total International Stock Index (VTIAX)
7% Oakmark International Small Cap (OAKEX)
5% Metropolitan West Total Return Bond (MWTRX)

2019 Return: 24.17%

Moderate Mutual Fund Saver Portfolio
15% Primecap Odyssey Growth
15% Oakmark Fund
15% Vanguard Dividend Appreciation (VDADX)
10% Vanguard Extended Market Index
21% Vanguard Total International Index
5% Oakmark International Small Cap
19% Metropolitan West Total Return Bond

2019 Return: 22.71%

Conservative Mutual Fund Saver Portfolio
10% Primecap Odyssey Growth
10% Oakmark Fund
10% Vanguard Dividend Appreciation
7% Vanguard Extended Market Index-
10% Vanguard Total International Index
4% Oakmark International Small Cap
30% Metropolitan West Total Return Bond
7% Fidelity Short-Term Bond (FSHBX) 
12% Vanguard Short-Term Inflation-Protected Securities (VTAPX)

2019 Return: 17.01%

Performance Recap: All of the stock funds in the portfolio delivered strong gains in absolute terms in 2019, though all of the domestic-equity funds in the portfolios lagged the S&P 500 last year. Despite its placement in the large-growth category, Primecap Odyssey Growth isn’t populated with giant positions in the usual suspects, like Apple (AAPL); rather, the portfolio’s idiosyncratic contrarian-growth portfolio can leave it out of step in strong market rallies. Meanwhile, Oakmark Fund struggled (in relative terms) due to its value bias and laggard picks like Netflix (NFLX). Vanguard Dividend Growth ended 2019 just a hair below the S&P 500, which was actually quite a robust performance given that its calling cards are its high-quality portfolio and lower-volatility performance profile. On the plus side, Oakmark International Small Cap, a foreign small-blend fund that is a small position in all of the portfolios, came soaring back after terrible losses in 2018. 

The more equity-heavy Aggressive portfolios outperformed the Moderate and Conservative portfolios, but bonds performed well overall. Metropolitan West Total Return Bond, an intermediate-term core-plus bond fund that’s the largest fixed income position in all three portfolios, performed in line with its Morningstar Category peers, gaining 9%. As interest rates trended down last year, short-term bonds didn’t benefit as much from declining yields. 

Portfolio Changes: None. However, given the underperformance of small-value and international stocks, investors who track this or a similar portfolio mix might consider rebalancing to boost their positions in those names.

Aggressive ETF Saver Portfolio
50% Vanguard Total Stock Market Index ETF (VTI) 
10% Vanguard Small-Cap Value ETF (VBR) 
30% Vanguard FTSE Developed Markets ETF (VEA) 
5% Vanguard FTSE Emerging Markets ETF (VWO) 
5% iShares Core Total USD Bond Market ETF (IUSB)

2019 Return: 25.89%

Moderate ETF Saver Portfolio
47% Vanguard Total Stock Market ETF
8% Vanguard Small-Cap Value ETF
20% Vanguard FTSE Developed Markets ETF
5% Vanguard FTSE Emerging Markets ETF
20% iShares Core Total USD Bond Market Index ETF

2019  Return: 23.62%

Conservative ETF Saver Portfolio
33% Vanguard Total Stock Market ETF
5% Vanguard Small-Cap Value ETF
10% Vanguard FTSE Developed Markets ETF
4% Vanguard FTSE Emerging Markets Index ETF
30% iShares Core Total USD Bond Market Index ETF
11% Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) 
7% Vanguard Short-Term Bond ETF (BSV)

2019 Return: 17.97%

Performance Recap: These all-index portfolios performed better than their mutual fund counterparts, as noted above. Vanguard Total Stock Market Index, the largest holding in all three portfolios, performed better than any of the domestic-equity funds in the mutual fund portfolios. Small-cap value was the worst-performing square of the Morningstar Style Box last year, so the portfolio's position in Vanguard Small-Cap Value was a hindrance. However, it delivered decent gains in absolute terms.

Portfolio Changes: None. However, given the underperformance of small-value and international stocks, investors who track this or a similar portfolio mix might consider rebalancing to boost their positions in those names. 

Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.