Aug 23rd, 2008
Negative Return But More Dollars in the Bank: Not Quite Awful
It’s been a rough time in the markets recently without question, but also not quite an awful time. One of the things that I like about my Vanguard account is that it quickly calculates one, three, and five year returns for my accounts. While the results right now are far from stellar–market appreciation is negative for both one and three years, and my one year rate of return for my total portfolio is a negative 7.4%–things are also not all that awful.
Despite the fact that the market has been in reverse for awhile (but may have stabilized in July and so far is positive in August) my total returns for both three years and five years are a positive 4.7% and 7.2%, buoyed by positive earnings in the bond market (yes, there is a reason to keep somewhere between 20 and 30 percent of your portfolio in bonds!) during this time. And because I’ve continued to contribute money (and so has my employer) as the market difficulties have gone on, my account is worth more even though the returns have not been great.
One final thing: keep perspective on these things–a loss of 7.4% doesn’t make me happy over a year, but it’s not the kind of losses we’ve seen in the past during bear markets–just remember 2000!
I just opened a Vanguard this year and so far my account is down 10%, but luckily that’s not as bad as the fund I invested in which is down 20% in the year to date.