We have all seen the graphs of investors starting at age 25-years-old being far better off than those who wait to start saving until 35-years-old, which display the power of compounding over time, but the problem is that the graph itself provides an undue instant gratification. Success is defined by decades, not any given year.
It has been about six years since I put any money into my old 401(k) (the one in which my quarterly re-balancing is tracked in each of these updates) and it too has grown significantly since its last dollar was added. As it grows in value, I have been steadily taking some of those earnings and supplanting losses in other funds. Based on the past eight years, I would wager that my portfolio would be higher if I had not been moving money out of the funds that I have been, but that is because the past eight years have been a bit of an anomaly with the markets going virtually in a one-way direction upward, but they can retreat at any point, significantly and suddenly, at which point other asset classes are likely to appreciate, where I have been accumulating additional shares at lower prices that I can then move into the depreciated stock market at the same quarterly interval.
As for this past quarter, the two big movers were a downward bond market and an upward small-cap assets that virtually evened out. My large-cap funds (both the index and actively managed fund) had moved slightly higher, and their increase was redirected into the high-yield bond market and international index fund in amounts that were similarly equal.
The decline in the bond market index fund is not surprising because, as interest rates increase, existing bonds would have to be sold at a discount as newer issues have more favorable interest rates. Of course, because the newer issues have a higher interest rate, those bonds will be higher interest income, generally paid out monthly, than the other bonds. As the price per share has decreased, the monthly dividend accrued should get higher.
No comments:
Post a Comment