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So, I've been going through my investments, reading investment books, thinking about slicing and dicing vs total market, etc. Being a little bored this morning I decided to put the last few years returns into a spreadsheet to see how the asset class correlations work out. Using the Excel CORREL() function, I get the following correlations (calculated on the yearly returns) between the S&P500 and the following assets:
2000 - 2006 (sorted)
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VTRIX (VG Intl val): 0.979
VGTSX (VG Intl): 0.961
NAESX (VG Small): 0.951
VWELX (VG Wellington): 0.905
VGSIX (VG Reit): 0.821
Dogs of the Dow: 0.813
DODBX (DC balanced): 0.790
VISVX (VG Small val): 0.782
Looking at just more recent data:
2002-2006 (also sorted)
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VGTSX: 0.999
VTRIX: 0.997
VWELX: 0.997
DODBX: 0.976
NAESX: 0.972
VISVX: 0.972
VGSIX: 0.901
Dogs: 0.820
From this data, asset allocation using the common slicing and dicing methods appears to be a waste of time.
I'm thinking this means the financial markets have become very efficient and it's easy for a person like me to buy into all these assets. Money flows easily around and around.
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Is this a good time to RE ? Ok, how about now...
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