Vanguard’s Balanced Index fund is a solid performer, averaging 8% annually for three decades. The fund is a mixture of stocks and bonds, a standard 60/40 asset allocation. However, your individual returns will vary greatly depending on your market timing skills.
February 18, 2020
Concerns over COVID crashed the market the day you purchased the fund; one month later, you’re down 21.5%, but it eventually recovered, returning 13.27%, or 3.91% annually. A $100,000 investment is worth $113,270 – not a great return, but it’s better than losing money!
March 20, 2020
If you waited one month to buy the fund, your account was up 44.5% by the end of the year. Your timing was perfect, and your friends and family think you’re a financial genius. The fund has averaged 12.30% per year, and your $100,000 is now worth $144,350.
December 30, 2021
You sat on the sidelines during the COVID correction, and after watching the Vanguard Balance Fund rise, you finally invested. Trouble! You’ve lost 11.8%, turning $100,000 into $88,190, and you’re probably upset and kicking yourself for not waiting until market conditions improve.
October 12, 2022
You deferred your purchase to October 12, 2022 – a smart move. The fund is up 11.75%, and your $100,000 investment is worth $111,750.
February 2, 2023
It’s Groundhog Day, and, so far, the market peak, and after three months, you’re down 1.13%. Your $100,000 is worth $98,870.
March 10, 2023
You picked the near-term bottom, and your account is up 4.88%. If the trend continues, you could earn more than 28% on your investment. Your $100,000 investment is worth $104,880.
November 9, 1992
Vanguard launches the Balanced Index Fund, and you invest $100,000, and you don’t make any changes to your holding, and it is now worth $1.04 million. You’ve done well!
Time eclipses timing. Do not worry about the daily gyrations in the market because you will never buy at the low or sell at the top. Instead, focus on your financial goals and let the long-term trend of the market work for you and your family.
You make most of your money in a bear market; you just don’t realize it at the time. ~ Shelby Cullom Davis
May 20, 2023
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on your asset level.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. Prices and yields are for today only and are subject to change without notice.