After the U.S. stock markets marched along at 17.5% annually from 1982 to 2000, most people knew that it would take a breather at some point. 

To put that growth in perspective, if you had invested $10,000 in a U.S. index fund, in 1982, it would have been worth more than $182,000—just 18 years later.

For the vast majority of investors in actively managed funds during that time frame, those results would look like a fantasy, instead of a historical reality.  A simple buy and hold strategy in a U.S. index fund would have earned that return.  Yet the average investor would have lagged those results while their financial advisors waxed poetically about how well they were doing.

We all know that the greatest statistical chance of stock market success comes from owning a variety of indexes, representing different asset classes and countries.

If an American invested responsibly (with low costs and diversification) since the year 2000, how would their money have fared, if they didn’t add a penny to their account?

I have some American friends who haven’t made a penny in the past decade.  They’ve made a bundle, lost a bundle, then made a bundle and lost a bundle, but overall, they haven’t recorded a net gain on their investments in more than a decade.  That’s a shame.  They could have made a killing.

When an American friend of mine recently asked me what a decent investment return would have been from 2001 to March, 2011, I honestly didn’t know, off the top of my head.  As a Canadian, I measure my investment results in Canadian dollars.

But I wanted to find out for him.

Logging on to the Assetbuilder website I wanted to see what a collection of portfolios comprised of low cost Dimensional Fund Advisor indexes would have done since 2001.  I wanted to use the DFA index funds for a reason, instead of tracking a basket of Vanguard funds.

The DFA indexes are used by Assetbuilder, a company that compiles the indexes into portfolios that they rebalance for each of their clients.  It gives each client a maximum amount of diversification and they don’t have to lift a finger.

Their portfolios range from conservative–with very little exposure to the stock markets–to higher risk portfolios, with greater exposure to the markets.  Here are a couple examples, before I show you the entire racing stable:

 This portfolio is mostly balanced between stock indexes and bond indexes.  For a 50 year old who doesn’t expect a corporate pension, I think this level of conservatism is perfect.  But how would that portfolio have performed from 2001 to February 2011?

Don’t tell your friends who are mired in expensive, actively managed mutual funds.  This portfolio gained +144% during this time period.

More suitable for a younger investor, this portfolio of DFA index funds has just 26% in bonds.  I think it’s fine for a 25 to 30 year old investor.  So how did it perform from 2001 to February, 2011?  It gained +192%.

Here’s a complete list of nine Assetbuilder indexed portfolios, along with their performances over the past decade.  I’m starting with the most conservative portfolio (portfolio 6)  and ending with the riskiest portfolio (portfolio 14). 

Nine Assetbuilder Portfolios:

 Asset Builder Growth of Wealth chart

see all the info -- click this chart

  You can see every one of Assetbuilder’s indexed portfolio performances here.

 What’s especially remarkable about these results?

Some people have referred to the past 10 years as “the lost decade”…due to the poor results earned from the world’s stock markets.  And we’ve certainly seen our share of crashes, rises, and crashes during the past 10 years.

But responsible rebalanced portfolios of indexes have proven to weather the storm, and leave most investors and their self-serving advisors miles behind.

You can find advisors who’ll build portfolios of DFA (or Vanguard) index funds for you.   These are the angels of the industry. 

 Seek them out.  Then advise your friends to do the same.  They can’t afford not to.