Jun 27, 2007

Vanguard Woes

Ok, I know mutual funds are rather safe when it comes to an investment, but I'm really bothered that my $8500 invested in a Roth IRA and index fund has turned into about $8338 over the course of two weeks. I know I have to deal with fluctuations in the market, but it's no fun to lose over $100 in two weeks. The only thing that keeps me from pulling my money out is knowing that if it lost $100 in two weeks, then it certainly could gain $100 in a similar time span. But that's not really the point of investing. I'm supposed to be making money, not watch it all sink down the drain. Maybe my investments are bad. Or maybe the market just isn't doing good for the time being. At what point should I be worried about my investments? When my $8500 is $6000?

Vanguard Mid-Cap Growth Index Fund Investor
Shares 180.505
$24.56 –$0.14 *$4,433.20
Subtotal $4,433.20 (Bought for $4,500)


Vanguard Target Retirement 2050 Fund
$24.06 –$0.07 $3,955.61
Subtotal $3,955.61 (bought for $4,000)



7 comments:

GoldnSilver said...

Market fluctuation is normal. It has only been 2 weeks. Generally if you are investing for the long term, the advice is not to check your balance everyday. However, people have different habits, no one can make you do or not do something.

Compare your funds to its peers or industry benchmark, that's how you can judge your funds performance.

That being said, if you are risk adverse, (seeing a drop with turn your stomach upside down). CD or bond funds are not bad options.

So many people focus on time horizion...if you are young you should invest more agressively. There's truth to it. However, just as important, one should know one's risk tolerance.

There are many investment/savings vehicles out in the market place that can help achieve your goals. Pick one that you can stomach.

Good luck!

enoughwealth@yahoo.com said...

A drop from $8500 to $6000 is a 30% decline - not very frequent in the stock market, but it does happen. If you're investing in that asset class you should have a time frame of at least 7 years in mind, and be mentally prepared to sit out any declines. Otherwise you're likely to sell out near the bottom during the next bear market and miss out on the long term performance of this asset class.

A mutual fund investment has more "safety" than investing in an individual stock, due to the benefits of diversification, but the ones you are in are all in the one asset class. This means you are NOT diversifying away market risk. To do so would require investing in a "balanced" fund, which is expected to have lower long term ROI, but less volatility (risk).

If a drop of more than 10% would make you feel like liquidating your investment, then your current asset allocation doesn't match your risk tolerance.

Regards
http://enoughwealth.com

Glenn said...

Take a step back and look at the big picture. If you are young and you will not need the funds for over 10 years don’t panic. You will be adding to your investments over time. If they funds are still lower when you make your next investment, you will be buying the same companies at a lower price. When you go shopping would you rather buy the same product at a lower price or a higher price? The same goes for mutual funds and stocks.

To invest in the market you also have to have faith in the long term returns.

SavingDiva said...

I understand your frustruation with your loss. I don't like to lose any money. I've had to stop checking my retirement accounts every day because of market fluctuations causing fluctuations in my blood pressure! :)

Anonymous said...

Don't worry about the Roth. You put that money away BECAUSE you won't need it tomorrow. It doesn't make any difference if it's worth $1 or $1 million tomorrow as long as it's worth quite a bit when you're old and finally ready to withdraw it.

And . . . if you do withdraw it tomorrow you'll get pinged and that may be worse than the fluctuation.

How much do need the money in the other account? Were you depending on a quick gain to pay the rent this month? If not, give it atleast a year. These are supposed to be long term investments, not quick capital gains.

Wanda said...

Don't look at your investments every day or even every couple of weeks. Unless you are a day trader, there's no reason to.

In the long run, we're all betting that the market goes up. That said, you have 90%+ of your IRA in equity, so be prepared to stick it through bear markets.

Buying high and selling low (what you'd essentially be doing if you get spooked and sell now) is a sure way to lose money.

If a 2050 fund & a mid-cap makes you sick at night, then it's not the investment for you. Like goldnsilver said, pick something that pass the stomach test. Pick something with 20% bonds. You'll have less risk (of losing your money), but you'll be giving up the rewards (or potentially larger returns).

hazygrey said...

This is your IRA - you shouldn't be pulling out money for 40 years. Don't worry about it and leave it for now. I know it's easier said than done. Also remember that there have been double digit gains in the stock market for several years now, and a correction or crash could happen soon. When that happens, don't panic and don't touch the money!

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