To understand the challenges of managing bond index funds, consider two data points: The Bloomberg U.S. Aggregate Bond Index contains more than 13,000 securities, while the CRSP U.S. Total Market Index comprises about 3,600 securities. The breadth of the fixed income market is just one of the challenges bond index fund managers face.

Investors are uneasy. To make sense of today’s volatility, it can be helpful to look at the past. It demonstrates that volatility isn’t one-directional or constant in magnitude, nor is it always spurred by the same type of risk.

As we reflect on the investment returns for 2024, it’s clear that the year provided strong returns for diversified, balanced investors who were able to tune out the noise.

History suggests that investors shouldn’t be concerned about material asset return differences under different political administrations. A portfolio of 60% equities and 40% fixed income has produced an annual compound return of 8.1% since 1860 with a Republican president and a 7.8% annual compound return with a Democratic president.