Friday, May 27 2022

DNY59/E+ via Getty Images

Without a doubt, it had to happen eventually. As an investor, you can’t expect to do well year after year without a few setbacks. But over the past 10 years or so, setbacks have been rare. Almost all The ETF or equity fund you invested in would have produced very satisfying returns as long as you waited for relatively short-lived bumps in the road.

And if you thought, as I always have, that by holding bond funds you would almost always be spared the worst of any serious downtrend like the one we’ve entered now, well, it turns out now no. Surprisingly, this time many bond investments suffered even more than many stocks.

While the possibility of a quick rebound cannot be ruled out, it is difficult to have great confidence in any fund’s ability to rebound quickly given the multiple issues currently facing equity and bond funds. . On the contrary, it may be long and slow before your funds can once again approach the type of return that many investors expect based on the previous decade. But even if you’re a long-term investor hoping that this beating stocks have taken so far in 2022 will also pass, you might be wondering if there’s anything you can do in the meantime. given how long it can take for a lot of money to get out of the deep hole they’ve dug themselves.

While most equity funds, at the time of this writing, are still posting positive returns over the past one-, three-, and five-year periods, these longer-term gains have been seriously eroded from the start. of this year. So what, if anything, should an investor do?

Of course, there are three options regarding your current holdings: sell, hold, or buy. But there is also a fourth option: you can also trade to new positions that you do not currently occupy or that you feel may have too little. Let’s take a look at each of these choices:

To sell? Well, maybe. But it’s probably too late to sell positions that have already fallen significantly, thereby locking in losses.

Hold? This is usually the best option, especially if you consider yourself a long-term investor. But you have to make a firm commitment that you won’t end up selling at an even bigger drop in value later on if the downtrend progresses even further.

To buy? Well, prices for most funds are now much more reasonable than they were at the end of last year. But you have to be prepared for this long journey which can lengthen the time it takes to see positive results.

To exchange? To trade, you must have a good reason to exit one fund and put the product into another. For example, if you expect so-called growth funds to underperform the market, you might want to shift some of that type of investment into a value fund that seems to have better prospects. (You might want to check out my January post on this topic.) But to be successful, you need to be correct on both assumptions. And if you still have a gain in the fund you’re taking out and it’s in a taxable account, you’ll have to pay capital gains tax (but that’s not the case when transferring to a tax-deferred account).

To help you decide between these options, you can consult the following tables indicating the relatively Best performing Vanguard ETFs and mutual funds so far in 2022, plus the following facts. Click on this link to find the latest year-to-date (YTD) data.

-Of the 76 stock and bond ETFs listed on Vanguard’s website, 73 of them are currently in negative territory.

Of the three that, at the time of this writing, have managed to still have positive returns. All three are sector funds, namely energy (VDE), utilities (VPU) and consumer staples (VDC). The first two of these appeared in my recent article on the best ETFs when year-end inflation exceeds the Fed’s 2% target, which will almost certainly be the case in 2022.

– Out of a total of 124 stock and bond mutual funds listed on Vanguard’s website, there are also only three funds in positive territory (excluding money market funds). These are, again, energy (VGENX), the index of short-term inflation-protected securities (VTAPX) and an international fund, Global Capital Cycles (VGPMX) which invests heavily in precious metals and mining also found in my article that I just listed among the best types of stocks to own when inflation is high according to past history.

Although only the Vanguard ETFs above are in positive territory year-to-date, Table 1 additionally includes performance data for equity ETFs that are currently losing the least.

Table 1. Vanguard equity ETFs with the best performance since the start of 2022

Fund name (symbol)

Category

YTD

High Dividend Yield (VYM)

Large Cap Value

-0.61

ETF Mega Cap Value (MGV)

Large Cap Value

-1.01

S&P 500 Value ETF (VOOV)

Large Cap Value

-2.17

Value ETFs (VTV)

Large Cap Value

-0.86

Mid Cap Value ETF (VOE)

Large Cap Value

-1.95

ETF Core Consumption (VDC)

Sector/Mixture

+3.21

Energy ETF (VDE)

Sector/Value

+40.26

Utility ETFs (VPU)

Sector/Value

+2.60

Note: Data as of 04/28/22

As you can see, seven of the eight ETFs that are still in positive territory or losing the least so far this year are comprised mostly of value stocks. This is consistent with my January article cited above. Most of the remaining Vanguard ETFs are in deep negative territory, with bond ETFs, in many cases, right up there in negative territory with stock ETFs. And not a single one of the 20 bond ETFs is positive.

In Table 2, I show the stock and bond mutual funds that have lost the least so far this year (less than 3%).

Table 2. Vanguard mutual funds with the best performance since the beginning of 2022

Fund name (symbol)

Category

YTD

Short Term Inflation Protected Securities Index (VTAPX)

Short term government bond

+0.02

Short Term Treasury Index (VSBSX)

Short term government bond

-2.82

Ultra-short-term bond (VOOV)

Short-term obligation

-1.19

Short Term Tax Exempt Bond (VTEAX)

Short-term obligation

-1.81

Dividend Growth (VDIGX)

Large Cap Value

-2.90

Equity Income (VEIPX)

Large Cap Value

+0.04

Dividend High Yield Index (VHYAX)

Large Cap Value

-0.66

Value index (VVIAX)

Large Cap Value

-0.89

Windsor (VWNDX)

Large Cap Value

-1.16

Mid Cap Value Index (VMVAX)

Mid cap value

-1.94

Note: Data as of 04/28/22

Recommendations

These recent performance trends, along with other economic factors that I have discussed for some time in my previous articles, lead me to believe that value-oriented ETFs and mutual funds will continue to outperform mutual funds. growth or even the so-called mixed funds for the next one. a year or two or more.

I include mixed funds such as Vanguard S&P 500 (VOO) as possibly underperforming value funds because many have more growth-oriented stocks than value-oriented ones, giving them a tilt towards growth instead of a more intermediate balance between growth and value.

It’s also worth noting that even a value-oriented fund like VTV has roughly the same number of non-value-oriented stocks in its portfolio as value stocks. While my thesis is that value stocks are likely to outperform both growth stocks and mixed stocks, more adventurous investors might want to try a so-called “pure” value mutual fund, such as Invesco S&P 500® Pure Value ETF (RPV). He holds more than 80% of his portfolio in Value stocks, compared to 46% for the much more popular Vanguard fund. As of 4/28/22, it had returned 4.11% year-to-date, beating 96% of large-cap value funds.

Previous

Kirby McInerney LLP reminds investors that

Next

Show your support for Linfield today | Latest news

Check Also