How Did the Retirement Saver Portfolios Perform in 2023?

With between 50% and 95% of their assets in stocks, my Retirement Saver portfolios are geared toward people who have several—or possibly many more—years until retirement. With so much in equities, you would expect them to perform well in absolute terms in a rally year like 2023, and they did. Those recent gains have helped to at least partially erase their losses in last year’s rout.

At the same time, the Saver portfolios’ 2023 performance illustrates that diversification hasn’t provided much of a boost to returns, at least in relative terms. Five of the six Saver portfolios lagged similarly allocated portfolios of basic U.S. stock, non-U.S. stock, and fixed-income index funds. (I like creating that type of benchmark to help assess whether security-selection decisions have added or subtracted value.) In the mutual fund portfolios, a sliver of Vanguard Divided Appreciation VDADX—a fixture in my model Bucket portfolios for retirees—contributed a healthy share of the underperformance. In the Conservative portfolios, both mutual fund and exchange-traded fund, positions in shorter-term bonds held back results relative to a portfolio of plain-vanilla total market index funds. That represented a turnabout from 2022, when the portfolios all bested their index-fund benchmarks thanks to those same conservative exposures.

Only the Aggressive Mutual Fund portfolio managed to beat its ETF counterpart and its blended index-fund benchmark in 2023. A 20% weighting in red-hot Oakmark Fund OAKMX was the main factor; that fund gained nearly 31% versus 26% for the broad market in 2023.

These Retirement Saver portfolios are geared toward investors’ tax-sheltered accounts, but I’ve also created tax-efficient versions, both mutual fund and ETF. Additionally, for investors who are compelled by a simple portfolio of index funds or ETFs—I’ve created Minimalist versions.

Looking Back at Retirement Saver Portfolios’ 2023 Outcomes

Mutual Fund Saver Portfolios

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

2023 Return: 21.54%

Moderate Mutual Fund Saver Portfolio

12% Primecap Odyssey Growth

13% Oakmark Fund

13% Vanguard Dividend Appreciation Index VDADX

10% Vanguard Extended Market Index

27% Vanguard Total International Stock Index

5% Oakmark International Small Cap

20% Metropolitan West Total Return Bond

2023 Return: 17.62%

Conservative Mutual Fund Saver Portfolio

10% Primecap Odyssey Growth

10% Oakmark Fund

10% Vanguard Dividend Appreciation Index

5% Vanguard Extended Market Index

10% Vanguard Total International Stock Index

5% Oakmark International Small Cap

30% Metropolitan West Total Return Bond

10% Fidelity Short-Term Bond FSHBX

10% Vanguard Short-Term Inflation-Protected Securities Index VTAPX

2023 Return: 13.44%

Performance Recap for Mutual Fund Saver Portfolios

Nearly every trend from the portfolios’ performance in 2022 reversed itself in 2023. The most aggressively positioned funds shone brightly, while more defensively positioned holdings detracted from relative returns. Oakmark Fund was the biggest winner in all the portfolios last year, atoning for its abysmal showing in 2022. Sibling Oakmark International Small Cap also boosted returns on the international side. Meanwhile, Vanguard Dividend Appreciation and Primecap Odyssey Growth, both standouts (relatively speaking) in 2022’s bear market, put up disappointing relative numbers. The Vanguard fund’s quality orientation and low weighting in technology stocks put it at a disadvantage in 2023’s risk-on market. The Primecap fund, meanwhile, struggled relative to its large-growth peers and the broad U.S. market thanks to its smaller-cap tilt and exposure to unloved biotechnology stocks and value names. The fund’s weak relative result in 2023 builds upon its poor track record over the past five years, but it retains a Morningstar Medalist Rating of Gold thanks to its seasoned management team and high-conviction process.

As interest-rate worries eased and fixed-income securities mounted a recovery, core fixed-income holding Metropolitan West Total Return posted a below-average return relative to its intermediate core-plus peers in 2023. The fund is also in the midst of managerial changes, with firm founders Laird Landmann, Tad Rivelle, and Steve Kane all departing or expected to do so between 2021 and the end of this year. Morningstar analysts like its prospects under their successors, though; the fund earns a Silver rating.

Portfolio Changes for Mutual Fund Saver Portfolios: None. All the holdings in the mutual fund portfolios retain Morningstar Medalist Ratings at this time.

ETF Saver Portfolios

Aggressive ETF Saver Portfolio

40% Vanguard Total Stock Market ETF VTI

10% Vanguard Small-Cap Value ETF VBR

35% Vanguard FTSE Developed Markets ETF VEA

10% Vanguard FTSE Emerging Markets ETF VWO

5% iShares Core Total USD Bond Market ETF IUSB

2023 Return: 21.47%

Moderate ETF Saver Portfolio

40% Vanguard Total Stock Market ETF

8% Vanguard Small-Cap Value ETF

25% Vanguard FTSE Developed Markets ETF

7% Vanguard FTSE Emerging Markets ETF

20% iShares Core Total USD Bond Market ETF

2023 Return: 18.08%

Conservative ETF Saver Portfolio

30% Vanguard Total Stock Market ETF

5% Vanguard Small-Cap Value ETF

12% Vanguard FTSE Developed Markets ETF

3% Vanguard FTSE Emerging Markets ETF

30% iShares Core Total USD Bond Market ETF

10% Vanguard Short-Term Inflation-Protected Securities ETF VTIP

10% Vanguard Short-Term Bond ETF BSV

2023 Return: 13.87%

Performance Recap for ETF Saver Portfolios

All three of the ETF Saver portfolios benefited from the stellar showing of Vanguard Total Stock Market ETF in 2023. As the largest holding in all the portfolios, it benefited from ample exposure to the “Magnificent Seven” stocks. Vanguard Small Cap Value, while a small position in each of the portfolios, detracted from relative results as the long-awaited rally in small-value stocks failed to materialize.

On the fixed-income side, core holding iShares Core Total USD Bond Market performed in line with other intermediate-term core-plus bond funds. But core-plus funds, which typically hold a dash of lower-quality bond exposure, outperformed core funds like total bond market index offerings in 2023. As bond investors breathed a sigh of relief that the economy sidestepped a recession, at least for the time being, lower-quality bonds were the beneficiaries. While the Conservative ETF portfolio benefited from its exposure to short-term bonds and short-term Treasury Inflation-Protected Securities in 2022, those exposures worked against the relative results in 2023.

Portfolio Changes for ETF Saver Portfolios: None.