Does diversification pay? Is a global balance portfolio better than a U.S. balance portfolio? The following five benchmark portfolios will serve for the purpose to answer the questions. Each of the portfolio has 60% in risk assets (stocks) and 40% in fixed income (US bonds). The 60% risk asset allocation is further spread equally into the risk asset classes available. For example, in the Six Core Asset portfolio, the 60% is divided into 12% each in U.S. equities, developed country equities, emerging market equities, U.S. REITs and commodities.

The following shows the performance comparison:

Portfolio Performance Comparison (as of 2/29/2012)

Portfolio/Fund Name YTD
Return
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Since 2001 (AR)
Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate 6% 3% 25% 23% 122% 5% 20% 7.06%
Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 8% 1% 11% 20% 115% 5% 18% 6.23%
Six Core Asset ETFs Strategic Asset Allocation Moderate 6% 2% 27% 20% 119% 5% 21% 6.96%
Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate 8% 1% 9% 19% 103% 3% 9% 4.62%
VBINX 6% 7% 39% 20% 130% 4% 19% 4.73%

Detailed Global Balance Portfolios Performance>>

Though U.S. centric VBINX (60% in U.S. stocks and 40% in U.S. bonds) has done well in the past 1 year, the diversification effect is undeniable in the last 5 and 11 year periods.