Take a Bow
Jonathan Clements | Jul 10, 2022
AS WE WATCH OUR portfolios get pummeled by 2022’s imploding financial markets, this might not seem like the time for self-congratulation. After all, Vanguard Total Stock Market Index ETF (symbol: VTI) is down 19% in 2022, while Vanguard Total Bond Market ETF (BND) has lost almost 11%.
But ponder this: If you’d been less sensible with your money, your results could have been far, far worse. In particular, take a bow if you:
- Didn’t buy cryptocurrencies. Bitcoin has plummeted 53% this year—and that’s better than many other cryptocurrencies.
- Didn’t invest in special purpose acquisition companies, otherwise known as SPACs. For instance, De-SPAC ETF (DSPC) has slumped 63% in 2022, Defiance Next Gen SPAC Derived ETF (SPAK) is off 36% and Morgan Creek Exos SPAC Originated ETF (SPXZ) is down 33%.
- Didn’t purchase nonfungible tokens or the companies looking to make money from them. Defiance Digital Revolution ETF (NFTZ), which says it tracks an index “comprised of equity securities of global publicly listed companies with relevant thematic exposure to the NFT (non fungible tokens), blockchain and cryptocurrency ecosystems,” has nosedived 63% this year.
- Didn’t buy Cathie Wood’s ARK Innovation ETF (ARKK), which became the talk of the financial world after it soared 153% in 2020, only to shed 23% last year and another 50% this year.
- Didn’t give up on international diversification. No, internationals stocks haven’t been big winners this year. But they’ve held up slightly better than the broad U.S. stock market, as evidenced by Vanguard FTSE All-World ex-U.S. ETF (VEU), which is down 18%, its performance helped by emerging markets. Indeed, Vanguard FTSE Emerging Markets ETF (VWO) is off 15% this year, better than both the broad U.S. stock market and developed foreign markets.
- Didn’t give up on value. Maybe your portfolio has a tilt toward value stocks, which have been one of this year’s most resilient stock market sectors, with Vanguard Value ETF (VTV) sliding just 8%. Maybe you simply stuck with your total market index fund, resisting the urge to load up on growth stocks. Yes, Vanguard Total Stock Market ETF (VTI) has lost 19% in 2022. But Vanguard Growth ETF (VUG) has tumbled 27%.
- Didn’t reach for yield. Vanguard Long-Term Treasury ETF (VGLT) is down 22% this year, Vanguard Long-Term Corporate Bond ETF (VCLT) has also fallen 22% and Vanguard Emerging Markets Government Bond ETF (VWOB) has slid 20%.
Lost “just” 11% on your bonds and 19% on your stocks? Cheer up. This year, that gets you bragging rights at the neighborhood barbecue.
Read more by Jonathan Clements
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I don’t remember you bragging about not buying bitcoin in ’21, when it was up 109%, or ’20, when it was up 301%, or ’19, when it was up 95%, or any of the 6 of the 8 prior years where it was the best performing asset in the world.
I guess most of us are investors, not gamblers.
If it’s any consolation, VTI just paid another quarterly dividend of $.749 a share on June 28. At least using dividend reinvestment, you can pick up some more shares at a better price.
I personally pick each stock I wish to own. I buy the most conservative blue-chip stocks, because I am retired and can’t afford to take risks. My portfolio is down 1.8930% since Dec 31, 2021.
Of course, when the stock market is in a manic boom, a portfolio like this doesn’t go up like crazy either. That’s OK with me.
Every investor has to pick the style of investing that feels right – there are many ways to make money as an investor. As JC has pointed out, there are also many ways to lose money.
Congrats! I follow a somewhat similar strategy and my stock portfolio is down 10.15% so far this year. Not great, but better than average. I don’t think you have to own the whole market to participate in the wealth creation opportunities of equity securities.
However, I think people are far too myopic regarding bear markets. It seems silly for long term investors to measure performance for just six months. There is nothing magical about the calendar year. It might better to view our portfolio performance over a complete market cycle.
Thank you for your encouraging words. My head knew the truth of your list of “wins”, but seeing it in print helps my heart to feel it.
Unfortunately we are all off another 8% or so because of inflation. So we’ve lost more like “just” 19% on bonds and 27% on stocks holding total bond and stock funds.
While we are on track to lose ~ 8% to inflation for the year, we are only 6 months in.
Good point. From January through May we have only lost about 4% of the purchasing power of our dollars. Hopefully inflation will abate somewhat for the last 7 months of the year.
You know it’s been quite a year when “unsuccessful” SPACs that didn’t buy anything and will return the cash to investors are the big winners by only losing value relative to inflation.