Saturday, August 27, 2011

Historical Returns for the MSCI EAFE Index (1970-2010)

As I have previously written, the Morgan Stanley Capital International, Inc. ("MSCI") Europe, Australasia Far East ("EAFE") Index is the benchmark index for foreign equity markets and is the foreign equity equivalent of the S&P 500 Index. The MSCI EAFE Index measures the equity market performance of developed markets in Europe, Australasia, and the Far East, excluding the U.S. and Canada.

The Index includes a selection of stocks from 21 developed markets, the largest of which are Japan and the United Kingdom. The MSCI EAFE Index has been calculated since December 31, 1969 and is the oldest large cap international stock index.

The charts below (click on the charts for a larger view) illustrate annual and annualized returns in terms of U.S. Dollars for the MSCI EAFE Index between 1970 and 2010. The Index has returned a total of 3,948% over the past 41 years, or an annualized average of about 9.45% per year.

The annualized return of the MSCI EAFE Index between 1970 and 2009 of 9.45% slightly trails the return of 9.99% of the S&P 500 Index during the same time period.

Many investment advisers recommend investing 20-30% of one's equity portfolio in large cap foreign stocks, such as those comprising the MSCI EAFE Index. Vanguard, for example, offers the Developed Markets Index fund and a corresponding ETF (symbol: VEA) that tracks the MSCI EAFE Index.

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