Here is an example of how a buy-and-hold approach through the market crash of 2008-09 might have compared to selling in the middle of all the carnage. We'll use a pair of very simple portfolios made up of exchange-traded funds purchased at the beginning of January, 2008.
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The Buy and Hold View |
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|
Portfolio |
Initial Investment |
Current Value |
Change in Price |
Income Received |
Total Cumulative Return |
|
iShares S&P/TSX 60 Index Fund (XIU) |
$6,000 |
$5,488.32 |
-8.50% |
$364.97 |
-2.40% |
|
iShares DEX Universe Bond Fund (XBB) |
$4,000 |
$4,144.24 |
3.60% |
$518.44 |
16.60% |
|
Total Portfolio |
$10,000 |
$9,632.56 |
-3.70% |
$870.66 |
5.00% |
|
The Buy and Flee View (you got out of the stock market at the end of September, 2008, and bought a money market fund with the proceeds) |
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|
Portfolio |
Initial Investment |
Current Value |
Change in Price |
Income Received |
Total Cumulative Return |
|
iShares S&P/TSX 60 Index Fund (XIU) |
$6,000 |
-$5,047.84 |
-15.90% |
$103.77 |
-14.10% |
|
iShares DEX Universe Bond Fund (XBB) |
$4,000 |
$4,144.24 |
3.60% |
$518.44 |
16.60% |
|
Big bank money market fund |
$5,047.84 |
$5,120.33 |
1.40% |
$0.00 |
1.40% |
|
Total Portfolio |
$10,000 |
$9,264.57 |
-7.40% |
$622.21 |
-1.13% |
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Notes: "Income Received" is dividends for XIU, bond interest for XBB. "Current Value" is to Nov. 30 (the stock market gains seen in early December would make the buy-and-hold case stronger). "Total Cumulative Return" means share price change plus income dating back to the portfolio set-up date |
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