Vacation is over, bring on 2009! Time for a quick look back. Instead of accounting for all my various cashflows, I decided to first review how the individual mutual funds in my investment portfolio did during 2008. (Data taken from Morningstar.) Here are the numbers along with the breakdown by asset class:
|Holding %||Asset Class||2008 Total Return|
|34%||Broad US Stock Market||-37%|
|VTSMX – Vanguard Total Stock Market Index Fund|
|8.9%||US Small-Cap Value||-32.1%|
|VISVX – Vanguard Small Cap Value Index Fund|
|8.5%||Real Estate (REITs)||-37.1%|
|VGSIX – Vanguard REIT Index Fund|
|25.5%||Broad International Developed||-41.4%|
|FSIIX – Fidelity Spartan International Index Fund*|
|8.5%||International Emerging Markets||-52.8%|
|VEIEX – Vanguard Emerging Markets Stock Index Fund|
|3.8%||Bonds – Short-Term||+6.7%|
|VFISX – Vanguard Short-Term Treasury Fund|
|11.3%||Bonds – Inflation-Indexed||-2.9%|
|VIPSX – Vanguard Inflation-Protected Securities Fund|
|Total Portfolio Weighted Return||-33.2%|
Just about every asset class related to equities was in the toilet, especially emerging markets. The bonds held their ground overall. I had a relatively aggressive mix of 85% stocks and 15% bonds, with an overall weighted return of -33.2%.
As a reference, the total return of the Vanguard S&P 500 Index Fund (VFINX) was -37% while the Vanguard Total Bond Market Index Fund (VBMFX) was up 5.1%. The Vanguard Target Retirement 2045 Fund (what I used to own) had a 34.6% drop.
Did I hold too much in stocks? I don’t think so. I’m only 30 years old right now, and if I’m lucky I’ll have potentially another 55 years in the market.
On the other hand, I do think that some retirees and near-retirees held too much stocks. “You need at least 60% in stocks at all time?” *Cringe*. Take the Vanguard Target Retirement Income Fund (VTINX), which is an all-in-one fund with an “asset allocation strategy designed for investors currently in retirement.” For 2008 it dropped only 10.9% with an asset allocation of 5% cash, 30% stocks, and 65% bonds. This is probably more appropriate for people in the withdrawal stage – something to sleep well with!
So, I am stuck trying to resolve two somewhat conflicting feelings. The volatility didn’t really worry me that much this year, and am happy to take some risk right now. But I also know that I don’t want to take risk later. I may need to shift my asset allocation towards more bonds faster than 1% per year, especially if I am going to retire early.
By Jonathan Ping | Investing | 1/4/09, 11:32pm