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How Did the Retirement Saver Portfolios Perform in 2019?

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

Securities In This Article
Vanguard Short-Term Bond ETF
(BSV)
PRIMECAP Odyssey Growth
(POGRX)
Vanguard Extended Market Index Admiral
(VEXAX)
Vanguard Wellesley® Income Admiral™
(VWIAX)
iShares JP Morgan USD Em Mkts Bd ETF
(EMB)

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.

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About the Author

Christine Benz

Director
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Christine Benz is director of personal finance and retirement planning for Morningstar, Inc. In that role, she focuses on retirement and portfolio planning for individual investors. She also co-hosts a podcast for Morningstar, The Long View, which features in-depth interviews with thought leaders in investing and personal finance.

Benz joined Morningstar in 1993. Before assuming her current role she served as a mutual fund analyst and headed up Morningstar’s team of fund researchers in the U.S. She also served as editor of Morningstar Mutual Funds and Morningstar FundInvestor.

She is a frequent public speaker and is widely quoted in the media, including The New York Times, The Wall Street Journal, Barron’s, CNBC, and PBS. In 2020, Barron’s named her to its inaugural list of the 100 most influential women in finance; she appeared on the 2021 list as well. In 2021, Barron’s named her as one of the 10 most influential women in wealth management.

She holds a bachelor’s degree in political science and Russian language from the University of Illinois at Urbana-Champaign.

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