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024 was a good year to be an investor, with just about anything making at least some money. The S&P 500 had a remarkable two-year run of 23%+ returns, not seen since the late 1990s. As I review our portfolio's performance each year for transparency and educational purposes, let me remind you that this is just our retirement portfolio, excluding other accounts like UTMAs, 529s, and cash reserves.
Our asset allocation is 60% stocks, 20% bonds, and 20% real estate, broken down as follows:
* Stocks: 25% Total US Stock Market, 15% Small Value Stocks, 15% Total International Stock Market, 5% International Small/Small Value Stocks
* Bonds: 10% Nominal bonds, 10% Inflation-protected bonds
* Real Estate: 20%, including 5% Publicly traded REITs and 10% Private equity real estate
Tracking error is a term that compares your portfolio return to an index. If you invest in well-run index funds, there's little point in benchmarking. However, many people compare their returns to the S&P 500, which can be misleading if they're invested in other assets.
Investing is a single-player game; compare your returns to the ones you need to achieve your financial goals. If you really need a bad guy to compete against, use inflation. Inflation in 2024 was around 3%, and I aim for a real return of 5% when running long-term portfolio projections.
Our overall retirement portfolio returned 9.62% in 2024, with an annualized return of 11.03% since we started investing in 2004. Our stock portfolio is relatively boring, with 25% invested in the Total Stock Market via VTI and its tax-loss harvesting partner ITOT, returning 23.85%. We're transitioning from US small value stocks to a new fund, which had a lower return this year.
Our bond returns were disappointing, especially on the nominal side, where we made just 1.4% in muni bonds due to the inverted yield curve. Our inflation-indexed bonds returned around 2%, and our I Bonds made 3.98%.
Our real estate portfolio is more complex, with a mix of equity and debt investments. We have several medium-sized investments through various funds, including one that had a great year with a 51.7% gain. Another fund showed a return of 28.56%. Our largest real estate investment is the DLP Housing Fund, which aims for a 10%-12% return and got 9.97% in 2024.
Our overall real estate returns for 2024 are as follows:
* Equity: 7.1%
* Debt: 9.9%
* Publicly traded REIT: 5.0%
It's not a bad year, especially considering the struggles of many other asset classes. What do you think? How did your portfolio perform in 2024?
