The Risk and Return Characteristics of Major Asset Classes and Several Portfolios - Term Paper Example

RUNNING HEAD: Risk and Return Characteristics The Risk and Return Characteristics of Major Asset classes and Several Portfolios that Aid to Make Recommendations to Certain Customer Types. Name: Student ID: Instructor: Course Unit: Date: Table of Contents: Historical Returns for the 3 Portfolios from 1995 to 2009:…………………...……………….. 3 Expected (Average) Return & Risk (Standard Deviation) for the 5 Assets & 3 Portfolios:…… 3 Purpose of Superannuation Fund:………………………………………………………………. 4 Features & Important Characteristics of the Asset Classes in Table 1:………………………… 4 Meaning of Expected Return and Risk in Finance:…………………………………………….. 5 Importance of Diversification and How It Affects the Risk and Return:……………………… 6 Portfolio Recommendations to Each of the Three Customer Types:…………………………… 7 The Portfolio Option that I would choose:……………………………………………………… 9 References.................................................................................................................................... 10 Appendix 1: Historical return Calculations for each of the 3 portfolios:.................................... 11 Appendix 2: Calculations of expected (average) return for asset classes & portfolios:............. 13 Appendix 3: Calculations of risk (standard deviation) for each of asset classes & portfolios:... 15 Appendix 4: Table 1: Historical returns for the major asset classes........................................... 19 Appendix 5: Historical Graph Performance Trends for Portfolios ABC, ACD and EDC:......... 20 1. a). Historical Returns for the 3 Portfolios from 1995 to 2009: The historical return for each of the three portfolios for the years 1995 to 2009 is as follows (see appendix 1 for how the calculations were computed); PORTFOLIO ABC: Historical return of; 1995 is 19.96%; 1996 is 12.98%; 1997 is 19.72%; 1998 is 17.06%; 1999 is 12.16%; 2000 is 7.1%; 2001 is 7.24%; 2002 is -8.04%; 2003 is 11.3%; 2004 is 25.12%; 2005 is18.68%; 2006 is 24.08%; 2007 is 8.68%; 2008 is -40.28%; and 2009 is 25.62%. PORTFOLIO ACD: Historical return of; 1995 is 18.47%; 1996 is 14.25%; 1997 is 14.63%; 1998 is 13.07%; 1999 is 6.31%; 2000 is 10.53%; 2001 is 10.64%; 2002 is 1.01%; 2003 is 11.21%; 2004 is 24.8%; 2005 is15.46%; 2006 is 23.19%; 2007 is 7.13%; 2008 is -33.49%; and 2009 is 22.28%. PORTFOLIO EDC: Historical return of; 1995 is 11.9%; 1996 is10.06 %; 1997 is 9.86%; 1998 is 8.54%; 1999 is1.76%; 2000 is 10.02%; 2001 is 7.14%; 2002 is 6.84%; 2003 is 5.32%; 2004 is 11.16%; 2005 is7.08%; 2006 is11.04%; 2007 is 6.42%; 2008 is -5.78%; and 2009 is 3.5%. b). Expected (Average) Return & Risk (Standard Deviation) For the 5 Assets & the 3 Portfolios: The expected (average) return for each of the five asset classes as well as the three portfolios is as follows(see appendix 2 for how the calculations were computed); Asset A 11.85%; Asset B 7%; Asset C 9.23%; Asset D 8.01%; Asset E 5.73%; PORTFOLIO ABC 10.76%; PORTFOLIO ACD 10.63%; and PORTFOLIO EDC 6.99%. While their respective risk (standard deviation) are(see appendix 3 for how the calculations were computed); Asset A 10.98%; Asset B 18.51%; Asset C 20.32%; Asset D 6.91%; Asset E 1.12%; PORTFOLIO ABC 16.06%; PORTFOLIO ACD 13.38%; and PORTFOLIO EDC 4.42% 2. Purpose Of Superannuation Fund: Superannuation fund is one that is put together by an arrangement of obligatory and deliberates involvements from employer’s and individuals over their operational lives and are saved for some good point in time before they can be accessed with the exception of out of the ordinary state of affairs. This is a government normalized savings policy with a primary objective of taking care of Australians monetarily upon retirement, at the same time it is intended to lighten the heavily burden of pension necessities on the government for providing for the elderly by way of taxation. This was necessary because the Australia population has more ageing people and a smaller number of children. 3. Features & Important Characteristics of the Asset Classes in Table 1 (see appendix 4) A bond is a long term debt implements subjected by corporations or governments. It is features are; the bonds maturity at different times offers different rates of returns, this is evident in table 1(see appendix 4) the historical returns are different, but the bonds have a less risk (6.91%) and yield to high expected returns (8.01%). Shares correspond to assert on the assets and earnings of a business and replicate part tenure of the business, Australian shares characteristics and features include; the risk (standard deviation) is less (10.98%) thus yields a greater expected return (11.85%), this supports the characteristics of shares that they have the competence to generate both income and capital growth. International shares have a feature of having higher risk and low expected values due to issues like economy trends and markets, from table it’s evident by the higher risk of 18.5% and expected return of 7%. Listed property has low risk and higher expected returns because of the assets appreciating in value, this is evident by the values of asset D with risk of 6.91% and return of 8.01%. Cash is a short-term investment whereby one deposits cash and receives returns in ninety or less than days. It has a feature of having very minimal risks and higher returns as exhibited by asset E with a very low risk of 1.12% but very high expected returns of 5.73%. In fact the name “Cash” here in draws from the fact that the investment can be expediently be exchanged into cash 4. Meaning of Expected Return and Risk in Finance: Expected return refers to the average of a probability distribution of potential returns or the average of annual historical returns. Risk refers to the standard deviation of the return on total investment or degree of uncertainty of return on an asset, in other words it is the possibility that the actual return on an asset will be diverse from its expected return. The relationship between expected return and risk is that, the greater the variability, the greater the risk. For instance from table 1 (see appendix 4); Asset C is riskier because of its standard deviation being higher (20.32%) than the rest of the assets and the three portfolios, it’s followed by asset B with a standard deviation of 18.51% and in consequence gives a lower expected return of 7%, this is concurs with the statement that, the greater the risk (standard deviation) the lesser the expected return, the trend is also supported with the portfolios ABC and ACD. On the other Asset E is the least risky because it has the lowest risk (standard deviation) and thus gives the highest returns compared to the risk variable and the other assets and the three portfolios, this trend is also shown by assets A and D, and portfolio EDC, therefore illustrating that the lesser the risk the higher the expected returns. 5. Importance Of Diversification And How It Affects The Risk And Return. Diversification is the technique of blending an extensive range of investments within a portfolio. It is the distribution of investments to decrease risks. For the reason that the instabilities of a particular security takes in a lesser amount of impact on a diverse portfolio, diversification hence minimizes the risk from any one investment while maximizing returns, but at times it also reduces the returns. The risk is reduced because of the blending of more positive and the negative assets, implying that the more positive asset neutralizes the negative ones. There are two main varieties of diversification; this is horizontal diversification that involves investing in similar investments; and vertical diversification that involves investing in very different investments. For instance from table 1 (see appendix 4) it’s evident that in portfolio ABC, the positive asset A has neutralized the negative assets B and C which were risky to invest in, the impact is that the risks of assets B and C have been drastically reduced and returns increased, but although the risk in asset A has been reduced its return has been decreased. In portfolio ACD, the positive assets A and D have neutralized the riskier asset C by reducing the risk and at the same time increasing the returns for the three assets. In portfolio EDC the positive assets E and D have helped to neutralize the riskier asset C but in the consequently lowering returns for D and C, and increasing these for E. From the previous examples in table 1 (see appendix 4) it is significant that one diversifies amongst various asset components. For the reason that various assets will not perform in the same mode to objectionable incidents, a mixture of portfolios will decrease one’s asset return’s sensitivity to market instabilities. But it is worthy to note that diversification doesn’t restrain losses, however it can reduce the impact risk of losses, risk can on no account be eradicated absolutely. 6. Portfolio Recommendations to Each of the Three Customer Types: I would advice the older member of the work force (Phoebus) who is hoping to retire in the next 18 months to take portfolio EDC: 60% cash; 20% Australian bonds; 20% listed property. This is for the reason that it is less risky and it has the greatest expected returns, compared to the other two portfolios, this is ABC and ACD. This implies that chances of him losing a large portion of his retirement benefits are narrow. When investing one should have a comprehensible proposal of what returns to expect as payment for the risk drawn in. The investment duration that you have and the amount of capital that you have on hand can also limit the kind of investment preferences that you ought to reflect on. Utilizing a short-term investment result for long-term investment duration is able to add to the opportunity cost of your choice. Conversely, using a long-term mechanism for a short-term necessitate can augment your liquidity risk and cause you to lose hard long-time earned money. Therefore to retire comfortably portfolio EDC suits Phoebus perfectly, because he has spread his portfolio between multiple assets and varied the risk in securities, as great losses in asset C are offset by assets D and E. The least R square value (see appendix 4: Graph 3) implies lower correlation and a weaker relationship between returns of the asset and benchmark index, thus also making it perfect for the one to invest in. The presence of cash investment also supports Phoebus to invest in since it’s a short term investment. I would advice the young Deakin Commerce graduate (Lionel) with a long and successful career ahead of him to choose portfolio ABC: 60% Australian shares; 20% international shares; 20% listed property. This is for the reason that it matches his financial circumstances, financial needs and risk tolerance. He is young and his career future is still bright, he can still translate his objective into quantifiable investment targets, in the quest of eventually getting his comfortable choice. Although the risk is high, it may possibly present returns that appeal to him. This portfolio also contrasts his securities by business, and by geography, therefore it reduces the impact of business and location-specific risks. It also blends investments among Australian and international finances. As a result of selecting funds in numerous nations, affairs within any single nation's economy will have less impact on the whole portfolio. The higher R square value (see appendix 4: Graph 1) implies higher correlation and a stronger relationship between returns of the asset and benchmark index. Hence the portfolio volatility will be identical to the subjective total of the individual asset volatilities. Lastly I would advice the middle aged couple (Lindsey and Ronald) with 3 children who are high income earners, but do not plan to retire for at least another 20 years, to chose portfolio ACD: 50% Australian shares; 30% listed property; 20% Australian bonds. For the reason that it diversifies across different assets, this is shares, bonds and listed property, hence varying the risk in securities, as great losses in asset C are offset by assets A and D. Although the risk increases compared to that of assets A and D the returns of C and D increases, hence the performance is increased. This portfolio also helps to overcome unsystematic risk which is risk that is definite to a business, for instance striking incidents, natural disaster like a fire, and slumping sales, which could cost the investor. Hence this portfolio is perfect for them, since it presents a mitigation aligned by means of market shakes since every asset class has diverse risks, rewards and tolerance to economic occurrences. 7. The Portfolio Option that I would choose: I would choose portfolio EDC due to the fact that it is not as much of risky which is evident by the low R square value thus showing a weak correlation. Further more the Cash investment has no default risk and it is a short term investment strategy thus giving even higher returns. The positive R square factor means that the portfolio follows the market trend, but more distinctively, is that this portfolio with an R square value of 0.2 will well tag along the market in a general decline, but does so by a factor of 0.2; implying that when the market has a general decline of 6% the portfolio will fall 0.12% thus minimizing the losses. Hence portfolio EDC is perfect for me in this case. Word Count (Main Body alone): 2000 Reference: Van Horne, J. C. & Wachowicz, J. M. 2005, Fundamentals of Financial Management, 12th edition. Financial Times Press, New York. Chapter Two. APPENDICES: Appendix 1: Historical return Calculations for each of the 3 portfolios for the years 1995 - 2009: PORTIFOLIO ABC: Return for 1995 = (0.6) x 20.2% + (0.2) x 26.5% + (0.2) x 12.7% = 19.96% Return for 1996 = (0.6) x 14.6% + (0.2) x 6.6% + (0.2) x 14.5% = 12.98% Return for 1997= (0.6) x 12.2% + (0.2) x 41.7% + (0.2) x 20.3% = 19.72% Return for 1998 = (0.6) x 11.6% + (0.2) x 32.6% + (0.2) x 17.9% = 17.06% Return for 1999 = (0.6) x 16.1% + (0.2) x 17.5% + (0.2) x -5.0% = 12.16% Return for 2000 = (0.6) x 4.4% + (0.2) x 2.6% + (0.2) x 19.7% = 7.1% Return for 2001 = (0.6) x 10.3% + (0.2) x -9.4% + (0.2) x 14.7% = 7.24% Return for 2002 = (0.6) x -8.1% + (0.2) x -26.9% + (0.2) x 11% = -8.04% Return for 2003 = (0.6) x 15.9% + (0.2) x 0.0% + (0.2) x 8.8% = 11.3% Return for 2004 = (0.6) x 27.6% + (0.2) x 10.8% + (0.2) x 32% = 25.12% Return for 2005 = (0.6) x 21.1% + (0.2) x 17.6% + (0.2) x 12.5% = 18.68% Return for 2006 = (0.6) x 24.7% + (0.2) x 12.3% + (0.2) x 34% = 24.08% Return for 2007 = (0.6) x 18% + (0.2) x -1.7% + (0.2) x -8.9% = 8.68% Return for 2008 = (0.6) x -40.4% + (0.2) x -24.9% + (0.2) x -55.3% = -40.28% Return for 2009 = (0.6) x 39.6% + (0.2) x -0.3% + (0.2) x 9.6% = 25.62% PORTIFOLIO ACD: Return for 1995 = (0.5) x 20.2% + (0.3) x 12.7% + (0.2) x 22.8% = 18.47% Return for 1996 = (0.5) x 14.6% + (0.3) x 14.5% + (0.2) x 13% = 14.25% Return for 1997 = (0.5) x 12.2% + (0.3) x 20.3% + (0.2) x 12.2% = 14.63% Return for 1998 = (0.5) x 11.6% + (0.3) x 17.9% + (0.2) x 9.5% = 13.07% Return for 1999 = (0.5) x 16.1% + (0.3) x -5.0% + (0.2) x -1.2% = 6.31% Return for 2000 = (0.5) x 4.4% + (0.3) x 19.7% + (0.2) x 12.1% = 10.53% Return for 2001= (0.5) x 10.3% + (0.3) x 14.7% + (0.2) x 5.4% = 10.64% Return for 2002 = (0.5) x -8.1% + (0.3) x 11.0% + (0.2) x 8.8% = 1.01% Return for 2003 = (0.5) x 15.9% + (0.3) x 8.8% + (0.2) x 3.1% = 11.21% Return for 2004 = (0.5) x 27.6% + (0.3) x 32.0% + (0.2) x 7.0% = 24.8% Return for 2005 = (0.5) x 21.1% + (0.3) x 12.5% + (0.2) x 5.8% = 15.46% Return for 2006 = (0.5) x 24.7% + (0.3) x 34% + (0.2) x 3.2% = 23.19% Return for 2007 = (0.5) x 18% + (0.3) x -8.9% + (0.2) x 4.0% = 7.13% Return for 2008 = (0.5) x -40.4% + (0.3) x -55.3% + (0.2) x 16.5% = -33.49% Return for 2009 = (0.5) x 39.6% + (0.3) x 9.6% + (0.2) x -2.0% = 22.28% PORTFOLIO EDC: Return for 1995 = (0.6) x 8.0% + (0.2) x 22.8% + (0.2) x 12.7% = 11.9% Return for 1996 = (0.6) x 7.6% + (0.2) x 13% + (0.2) x 14.5% = 10.06% Return for 1997 = (0.6) x 5.6% + (0.2) x 12.2% + (0.2) x 20.3% = 9.86% Return for 1998 = (0.6) x 5.1% + (0.2) x 9.5% + (0.2) x 17.9% = 8.54% Return for 1999 = (0.6) x 5.0% + (0.2) x -1.2% + (0.2) x -5.0% = 1.76% Return for 2000 = (0.6) x 6.1% + (0.2) x 12.1% + (0.2) x 19.7% = 10.02% Return for 2001 = (0.6) x 5.2% + (0.2) x 5.4% + (0.2) x 14.7% = 7.14% Return for 2002 = (0.6) x 4.8% + (0.2) x 8.8% + (0.2) x 11.0% = 6.84% Return for 2003 = (0.6) x 4.9% + (0.2) x 3.1% + (0.2) x 8.8% = 5.32% Return for 2004 = (0.6) x 5.6% + (0.2) x 7.0% + (0.2) x 32.0% = 11.16% Return for 2005 = (0.6) x 5.7% + (0.2) x 5.8% + (0.2) x 12.5% = 7.08% Return for 2006 = (0.6) x 6.0% + (0.2) x 3.2% + (0.2) x 34.0% = 11.04% Return for 2007 = (0.6) x 6.4% + (0.2) x 4.0% + (0.2) x -8.9% = 6.42% Return for 2008 = (0.6) x 6.7% + (0.2) x 16.5% + (0.2) x -55.3% = -5.78% Return for 2009 = (0.6) x 3.3% + (0.2) x -2.0% + (0.2) x 9.6% = 3.5% Appendix 2: Calculations of expected (average) return for each of the 5 asset classes & the 3 portfolios: The formula applied is: Expected (average) return (E [R]) = Sum of historical returns Total number of historical returns Expected (average) return (E [R]) for Asset A: = (20.2+ 14.6+ 12.2+ 11.6+ 16.1+ 4.4+ 10.3+-8.1+ 15.9+ 27.6+ 21.1+ 24.7+ 18+ -40.4+ 39.6) % 15 Therefore, E [R] for Asset A = 11.85% Expected (average) return (E [R]) for Asset B: = (26.5+ 6.6+ 41.7+ 32.6+ 17.5+ 2.6+ -9.4+ -26.9+ 0.0+ 10.8+ 17.6+ 12.3+ -1.7+ -24.9+ -0.3) % 15 Therefore, E [R] for Asset B = 7.0% Expected (average) return (E [R]) for Asset C: = (12.7+14.5+ 20.3+ 17.9+ -5.0+ 19.7+14.7+ 11.0+8.8+ 32.0+12.5+ 34.0+ -8.9+ -55.3+ 9.6) % 15 Therefore, E [R] for Asset C = 9.23% Expected (average) return (E [R]) for Asset D: = (22.8+ 13.0+ 12.2+ 9.5+ -1.2+ 12.1+ 5.4+ 8.8+ 3.1+ 7.0+ 5.8+ 3.2+ 4.0+ 16.5+ -2.0) % 15 Therefore, E [R] for Asset D = 8.01% Expected (average) return (E [R]) for Asset E: = (8.0+7.6+5.6+ 5.1+ 5.0+ 6.1+ 5.2+ 4.8+ 4.9+ 5.6+ 5.7+ 6.0+ 6.4+ 6.7+ 3.3) % 15 Therefore, E [R] for Asset E = 5.73% Expected (average) return (E [R]) for PORTIFOLIO ABC: = (19.96+12.98+19.72+17.06+12.16+7.1+7.24-8.04+11.3+ 25.12+18.68+24.08+8.68-40.28+25.62) %/ 15 Therefore, E [R] for PORTIFOLIO ABC = 10.76% Expected (average) return (E [R]) for PORTIFOLIO ACD: = (18.47+14.25+14.63+13.07+6.31+10.53+10.64+1.01+11.21+24.8+15.46+23.19+7.13+-33.49+22.28) %/ 15 Therefore, E [R] for PORTIFOLIO ACD = 10.63% Expected (average) return (E [R]) for PORTIFOLIO EDC: = (11.9+10.06 +9.86+8.54+1.76+10.02+7.14+6.84+5.32+11.16+7.08+11.04+6.42-5.78+3.5) %. 15 Therefore, E [R] for PORTIFOLIO EDC = 6.99% Appendix 3: Calculations of risk (standard deviation) for each of the 5 asset classes & the 3 portfolios: The formula applied is: Where; S- is the Population Standard Deviation X- Is the historical return value M- Is the Expected (average) return (E [R]); and n – Is the Total number of historical returns. Risk (standard deviation) for Asset A: = [((20.2-11.85)2+(14.6-11.85)2+(12.2-11.85)2+(11.6-11.85)2+(16.1-11.85)2+(4.4-11.85)2+(10.3-11.85)2+(-8.1-11.85)2+(15.9-11.85)2+(27.6-11.85)2+(21.1-11.85)2+(24.7-11.85)2+(18-11.85)2+(-40.4-11.85)2+(39.6-11.85)2)/ 15] ½ = [(1809.59/15)] ½ = [120.64] ½ Therefore, risk (standard deviation) for Asset A is 10.98% Risk (standard deviation) for Asset B: = [((26.5-7)2+(6.6-7)2+(41.7-7)2+(32.6-7)2+(17.5-7)2+(2.6-7)2+(-9.4-7)2+(-26.9-7)2+(0.0-7)2+(10.8-7)2+(17.6-7)2+(12.3-7)2+-17.7)2+(-24.9-7)2+(-0.3-7)2) / 15] ½ = [[(5138.12/15)] ½ = [342.54] ½ Therefore, risk (standard deviation) for Asset B is 18.51% Risk (standard deviation) for Asset C: = [((12.7-9.23)2+(14.5-9.23)2+(20.3-9.23)2+(17.9-9.23)2+(-5-9.23)2+(19.7-9.23)2+(14.7-9.23)2+(11-9.23)2+(8.8-9.23)2+(32-9.23)2+12.5-9.23)2+(34-9.23)2+-8.9-9.23)2+-55.3-9.23)2+9.6-9.23)2) / 15] ½ = [[(6194.08/15)] ½ = [412.94] ½ Therefore, risk (standard deviation) for Asset C is 20.32% Risk (standard deviation) for Asset D: = [((22.8-8.01)2+(13-8.01)2+(12.2-8.01)2+(9.5-8.01)2+(-1.2-8.01)2+(12.1-8.01)2+(5.4-8.01)2+(8.8-8.01)2+(3.1-8.01)2+(7-8.01)2+(5.8-8.01)2+(3.2-8.01)2+(4-8.01)2+(16.5-8.01)2+(-2-8.01)2) / 15] ½ = [[(715.72/15)] ½ = [47.71] ½ Therefore, risk (standard deviation) for Asset D is 6.91% Risk (standard deviation) for Asset E: = [((8-5.73)2+(7.6-5.73)2+(5.6-5.73)2+(5.1-5.73)2+(5-5.73)2+(6.1-5.73)2+(5.2-5.73)2+(4.8-5.73)2+(4.9-5.73)2+(5.6-5.73)2+(5.7-5.73)2+(6-5.73)2+(6.4-5.73)2+(6.7-5.73)2+(3.3-5.73)2) / 15]½ = [[(18.95/15)] ½ = [1.26] ½ Therefore, risk (standard deviation) for Asset E is 1.12% Risk (standard deviation) for PORTIFOLIO ABC: = [((19.96-10.76)2+(12.98-1076)2+(19.72-10.76)2+(17.06-10.76)2+(12.16-10.76)2+(7.1-10.76)2+(7.24-10.76)2+(-8.04-10.76)2+(11.3-10.76)2+(25.12-10.76)2+(18.68-10.76)2+(24.08-10.76)2+(8.68-10.76)2+(-40.28-10.76)2+(25.62-10.76)2) / 15] ½ = [[(3867.61/15)] ½ = [257.84] ½ Therefore, risk (standard deviation) for PORTIFOLIO ABC is 16.06% Risk (standard deviation) for PORTIFOLIO ACD: = [((18.47-10.63)2+(14.25-10.63)2+(14.63-10.63)2+(13.07-10.63)2+(6.31-10.63)2+(10.53-10.63)2+(10.64-10.63)2+(1.01-10.63)2+(11.21-10.63)2+(24.8-10.63)2+(15.46-10.63)2+(23.9-10.63)2+(7.13-10.63)2+(-33.49-10.63)2+(22.25-10.63)2) / 15] ½ = [[(2684.48/15)] ½ = [178.97] ½ Therefore, risk (standard deviation) for PORTIFOLIO ACD is 13.38% Risk (standard deviation) for PORTIFOLIO EDC: = [((11.9-6.99)2+(10.06-6.99)2+(9.86-6.99)2+(18.54-6.99)2+(1.76-6.99)2+(10.02-6.99)2+(7.14-6.99)2+(6.84-6.99)2+(5.32-6.99)2+(11.16-6.99)2+(7.08-6.99)2+(11.04-6.99)2+(-5.78-6.99)2+(3.5-6.99)2+(6.42-6.99)2) / 15] ½ = [[(293.05/15)] ½ = [19.54] ½ Therefore, risk (standard deviation) for PORTIFOLIO EDC is 4.42% Appendix 4: Table 1: Historical returns for the major asset classes Year to Dec. Australian Shares (Asset A) % International Shares (Asset B) % Listed Property (Asset C) % Australian Bonds (Asset D) % Cash (Asset E) % PORTFOLIO ABC % PORTFOLIO ACD % PORTFOLIO EDC % 1995 20.2 26.5 12.7 22.8 8.0 19.96 18.47 11.9 1996 14.6 6.6 14.5 13.0 7.6 12.98 14.25 10.06 1997 12.2 41.7 20.3 12.2 5.6 19.72 14.63 9.86 1998 11.6 32.6 17.9 9.5 5.1 17.06 13.07 8.54 1999 16.1 17.5 -5.0 -1.2 5.0 12.16 6.31 1.76 2000 4.4 2.6 19.7 12.1 6.1 7.1 10.53 10.02 2001 10.3 -9.4 14.7 5.4 5.2 7.24 10.64 7.14 2002 -8.1 -26.9 11.0 8.8 4.8 -8.04 1.01 6.84 2003 15.9 0.0 8.8 3.1 4.9 11.3 11.21 5.32 2004 27.6 10.8 32.0 7.0 5.6 25.12 24.8 11.16 2005 21.1 17.6 12.5 5.8 5.7 18.68 15.46 7.08 2006 24.7 12.3 34.0 3.2 6.0 24.08 23.19 11.04 2007 18 -1.7 -8.9 4.0 6.4 8.68 7.13 6.42 2008 -40.4 -24.9 -55.3 16.5 6.7 -40.28 -33.49 -5.78 2009 39.6 -0.3 9.6 -2.0 3.3 25.62 22.28 3.5 E(R) % 11.85 7.00 9.23 8.01 5.73 10.76 10.63 6.99 RISK% 10.98 18.51 20.32 6.91 1.12 16.06 13.38 4.42 Source: AXA Financial Planning Appendix 5: Historical Graph Performance Trends for Portfolios ABC, ACD and EDC Read More