INDEX FUNDS

When learning to bake a cake you first have to understand the ingredients. Portfolio Charts focuses on low-cost index funds (sometimes called “trackers”) that provide convenient exposure to a wide variety of stocks, bonds, and real assets.  Here you can learn what the various acronyms mean, study how index funds work, and identify a good option suitable for your own personal asset allocation.

Categories /// Regions /// Asset Classes /// Funds /// Portfolios

Categories


Portfolio assets can be classified into three general categories:

Stocks
Bonds
Real Assets

Each category contains a variety of index funds defined by region and asset class. Assets within these categories can be distinguished by whether they are limited to your domestic market or are international or global in nature. When you see the portfolio icons, solid colors represent domestic assets while lighter cross-hatched colors represent international or global assets.

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Regions


Portfolio Charts is a little different from most investing sites because it is not solely focused on US markets. The calculators include domestic stocks and bonds from your home country as well as a variety of options for international stocks and global real assets. In addition, all numbers are automatically translated to domestic currency and inflation to track local purchasing power. The countries and regions covered include:

AUS : Australia

CAN : Canada

CHE: Switzerland

DEU : Germany

ESP : Spain

EUR : Europe

FRA : France

GBR : United Kingdom

ITA : Italy

JPN : Japan

NLD : Netherlands

SWE : Sweden

USA : United States

DEV: Developed — All developed countries weighted by market cap

DEV xUS : Developed ex-US — All developed countries excluding the United States

EM : Emerging Markets

Asset Classes


Portfolio Charts data tracks the most common high-level asset class definitions in the financial industry. So while individual index funds may vary and you should always check the contents of any fund you purchase, if it is a passive index that uses these terms then the tools here should model the asset reasonably well.

Domestic and International Stocks

Total Stock Market : The entire cap-weighted market with no size or value filter applied

Large Cap : The largest 85% of the market sorted by company size. Consistent with most real-world index funds, the large cap data includes both large and mid-sized companies.

Small Cap : The smallest 15% sorted by company size (excluding the very smallest 2% that qualify as micro caps)

Value : The cheap half of the market sorted by book-to-market

Growth : The expensive half of the market sorted by book-to-market

Blend : The total market segment with no value or growth filter applied. Note that this differs from the Morningstar definition, which classifies “blend” as stocks that are neither growth nor value. Portfolio Charts uses the definition preferred by most index funds.

Mix and match the size and valuation filters and you’ll get seven different types of stock index funds.  I use acronyms to save space, but here are the detailed definitions:

TSM : Total Stock Market
LCV : Large Cap ValueLCB : Large Cap BlendLCG : Large Cap Growth
SCV : Small Cap ValueSCB : Small Cap BlendSCG : Small Cap Growth

Bonds

Portfolio Charts bond data tracks the returns of the highest-grade government treasuries, bunds, or gilts with very little default risk. Every bond fund is a little different, but the most important thing to look for is the weighted average maturity of the fund.

LT : Long Term — Matures in 10-30 years

IT : Intermediate — The data varies a bit based on the most common local definition driven by fund availability. In the US, IT bonds mature in 3-10 years. In Europe, it’s 3-7. And in most individual countries, the available bond funds are of the “all maturity” variety with a weighted average maturity very near 10 years. The country-level data (for everything but the US) is based on 10-year bonds and should track these funds reasonably well.

ST : Short Term — Matures in 1-3 years

BIL : Tbills / Cash — Matures in < 3 months

While the data does not explicitly contain corporate bonds, most high-grade corporate bonds will have very similar returns to government bonds of the same average maturity. This also applies to popular total bond market funds.

Europe bonds represent the common currency Euro area only. The numbers use all credit ratings and changing EU composition as defined by the European Union. Numbers prior to the Euro are measured in ECU.

All bond funds on Portfolio Charts are unhedged.

Real Assets

Real Assets are a special subset of investments that have a tangible physical component to their value. They are often global and are independent of any single market.*

COM : Commodities

Commodity funds invest in a wide variety of items such as energy, agriculture, metals, livestock, and timber through the use of futures, stocks, and other financial instruments.

REIT : Real Estate Investment Trusts

Real estate investment trusts are companies that own or finance income-producing real estate including residential mortgages, commercial properties, and even timber land.

(*) REIT data is based on the United States REIT market, although a good global REIT fund is also a good option.  Because the US comprises over 60% of a typical global REIT fund, the numbers should be reasonably close in normal portfolio percentages.

GLD : Gold Bullion

Gold funds track the price of physical gold bullion, NOT gold miners.  In fact, the numbers are the exact same if you purchase bullion coins or if you buy a gold ETF. There’s also a gold ETF called GLD, but the asset can work with any gold fund.

Funds


Index funds are the real-world financial instruments you purchase to build a portfolio. There are two types of index funds — ETFs, and index-tracking mutual funds. The main difference to the end user is how they are traded. ETFs are priced like stocks and are traded in real-time, while mutual funds are more like accounts and usually settle at the end of the day. But as long as they are tracking the same index, the performance should be very similar.

Fund Finder

Portfolio Charts offers its own tool called the Fund Finder to help investors identify the cheapest combination of ETFs to build any portfolio. The Fund Finder contains recommendations from many of the largest ETF issuers around the world. These include:

  • Vanguard
  • iShares
  • SPDR
  • Schwab
  • Xtrackers
  • Amundi
  • Lyxor
  • UBS
  • BMO
  • Franklin Templeton
  • and more

The list is selective to only show fund options that I believe accurately reflect the data shown on the site. But it’s also NOT all-inclusive of every good fund out there. So just because something is shown does not mean you should buy it, and just because something is not on the list does not make it a poor option. Think of the list as a starting point for your own research, and plan responsibly.

Other fund resources I like

ETF Database: An excellent resource for ETFs available to US-based investors.

justETF: A full list of ETF options for European investors. Be sure to check the country setting at the top of the page.

Portfolios


Select an asset to see every portfolio that uses that type of fund.