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 how funds work, find an equivalent option for your own portfolio, and discover how professional investors use each asset to create a robust strategy that is greater than the sum of its parts.

Categories /// Regions /// Definitions /// Funds /// Portfolios

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 several 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

ESP : Spain

EUR : Europe

FRA : France

GER : Germany

ITA : Italy

JPN : Japan

NLD : Netherlands

SUI : Switzerland

SWE : Sweden

UK : United Kingdom

USA : United States

WLD DEV: World Developed — All developed countries weighted by market cap

WLD XUS : World ex-US — All developed countries excluding the United States

EM : Emerging Markets

Definitions

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 70% of the market sorted by company size

Mid Cap : The next 15% sorted by company size

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 ten 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 Value	LCB : Large Cap Blend	LCG : Large Cap Growth
MCV : Mid Cap Value	MCB : Mid Cap Blend	MCG : Mid Cap Growth
SCV : Small Cap Value	SCB : Small Cap Blend	SCG : 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 — matures in 3-10 years

ST : Short Term — matures in 1-3 years

BIL : Tbills / Cash — matures in < 3 months

10Y : constant maturity 10-year bond. A common measure of bond markets where more detailed yield curves are not available, this is somewhere between LT and IT in performance and can be a realistic substitute for both.

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.

While Europe stocks include the UK and Switzerland, 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

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. Select your home country below and you can search for appropriate funds for each asset from a variety of different providers. The list is not comprehensive and there may be other good options not shown, but it should point you in the right direction.