Dec 16th, 2008
Risk Management Fail?
One of our local papers has started running a series called “High Anxiety”, which is not about psychological disorders but instead about the difficulty people who live in this state have had with the current economic downturn. This episode caught my eye, about a still young retiree who has seen a large decline in his retirement savings.
The part that was concerning was this line:
“I lost about 80 percent of all my stocks and mutual funds.”
While this doesn’t tell me a lot about his asset allocation, it does make me question what he was invested in. Yes, the market has had a really rough stretch here, but 80% is a lot more than the stock market as a whole. I’m not sure when the interview was done, but as of the end of November, the Vanguard Total Stock Market Index fund (VTSMX)–the cornerstone of my model portfolio–is down considerably for the year (38.19%), but less than half of his stated 80% decline!
This is not to say he’d be doing great with a 38% loss, but I’d trade an 80% loss for a 38% loss any day of the week.
I don’t want to rub salt in anyone’s wounds regarding their stock market performance this year; I’m just wondering what he was invested in. Whatever it is, it seems to have had a lot more risk–which was realized, sadly–than the total market.
[...] at Uncommon Cents writes about an investor who has lost 80% of the value of his assets in the economic meltdown (ouch!) Ryan points out that a popular index fund is down 38%. While [...]