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DAD GAVE ME $1,000 in the mid-1980s on condition I start an IRA and make my own annual contributions, which I did at least some of the time. He recommended doing business with Vanguard Group, which was headquartered near my hometown of Wayne, Pennsylvania.
I can remember reading about the STAR fund, Windsor II, Wellington, Wellesley, the gold and precious metals fund, and the very highly regarded health care and energy funds. I recall the wonderful letters that Vanguard founder Jack Bogle wrote to introduce each annual report.
I invested back then in the STAR Fund and Windsor II, but eventually switched to other funds—probably the sector funds. I was always drawn to investing in something “real” like gold and oil. And I began to think the STAR fund—perhaps one of the earliest asset allocation funds—was some kind of odd mishmash.
As the years went by, I was all over the place, moving my IRA to different companies and raiding it (like a fool) at times of financial need. I dabbled in gold and natural gas ETFs and Jim Rogers’s International Commodity Index-Agriculture ETN. (Heck with you, Jim.)
Most critically, I was heavy on the stocks of Goldman Sachs, Morgan Stanley and even Lehman Brothers until the bitter end during the Great Financial Crisis. And yes, despite knowing better—much better—I sold Goldman and Morgan Stanley near the bottom and didn’t catch the eventual recovery.
Recently, I had an idea to write an article titled, “The trouble with financial advice.” I wanted to critique the unequivocal asset allocation recommendations of an acclaimed 2005 book. That got me thinking back to the historical performance of simple balanced funds, and how investors who didn’t listen to the author would have fared in some typical fund company offerings.
Finally, I looked back to 1985 to see what my results in the STAR and Windsor II funds would have been if I had stopped thinking and just let them ride. The results are sobering: The STAR fund delivered a compound annual growth rate of 9% from Dec. 31, 1985, through May 31 of this year. An initial investment of $3,000 would have become nearly $54,000.
Windsor II—despite a performance shortfall in the 2010s and the departure of longtime manager James Barrow in 2015—grew at a 10.2% annual rate, which would have turned $3,000 into more than $76,000. Wellington, even with its hefty 40% in bonds, grew at 9.8%, for a terminal value of nearly $69,000.
And the Wellesley Income Fund, with about 60% in bonds, would have turned $3,000 into nearly $51,000. Wellesley? Another stuffy Vanguard fund named after the Duke of Wellington? Pfshaw! That’s for grandmothers with antique furniture and a coat of arms.
If only I had acted like my grandmother—who lived on Windsor Avenue in Philadelphia—and invested regularly in one of these funds and held on. If I had virtually ignored the late 1990s boom (when those funds seemed especially old and gray) and the financial crisis, I might be a millionaire by now, or darn close.
I’m embarrassed to say that, to the detriment of my retirement and my children’s ability to pay for college, I am nowhere close to such a fortune. But I am not far from retirement age.
I used to blame Dad for not having more money invested in stocks after he sold his business in the early 1980s, as the great bull market began. How much money could the family have had?
But now, I have only myself to blame.
William Ehart is a journalist in the Washington, D.C., area. In his spare time, he enjoys writing for beginning and intermediate investors on why they should invest and how simple it can be, despite all the financial noise. Follow Bill on Twitter @BillEhart.
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It’s only a gain and/or a loss if you sell it….so dontafoolauself !!
If you’re a parent the simple act of giving a sum of money, with strings attached, to an young, adult child is key. Like the author my parents gave both me and my brother $3000 in the mid-1990s with the stipulation that we open an IRA. What unfolded next was a tale of two brothers. I really got into the investing, learned as much as I could on my own, and experimented as a DIY investor. I made some mistakes but eventually I came round to embracing low cost mutual fund investing and my money grew. My brother never paid much attention and ended up relying on a person he didn’t know at Wells Fargo who churned his account. While each individual will react differently to such an experiment, in my parents’ eyes, they were successful with me. In my eyes, I’m indebted to them for giving me the seed money.
My entire retirement acct is comprised of two funds: Wellington and Wellesley. Best decision I’ve made.