Sunday, April 19, 2020
In my ebook on Retirement Income Analysis know, I suggest that retirees consider investment in two main types of vehicles: Treasury Inflation Protected Securities (TIPS) and a World Bond/Stock fund (WBS). This post shows the performance of a proxy for the latter in the turbulent quarter when the COVID-19 pandemic first took its toll on almost every aspect of peoples' lives, including asset values.
As in previous blogs in this series, I will use two Vanguard ETFs (exchange traded funds) to represent investment in world stocks and bonds: VT (their world stock ETF) and BNDW (their world bond ETF). Their cumulative returns with dividends reinvested over the quarter are shown in the diagram below (using data from Yahoo Finance). Also shown is WBS, a portfolio that includes shares of the two ETFs in proportions intended to represent the relative values of bonds and stocks in the world (details of the construction of the latter are given later in this post). Note: this portfolio is not to be confused with Webster Financial Services, whose stock has the ticker symbol WBS.
As is well known, there was a disastrous fall in the values of stocks around the world in this period, with a subsequent rise that gave back roughly half of the losses. On the other hand, bond prices fell only modestly, then ended the quarter slightly higher than they started. Not surprisingly, the world bond and stock fund experienced smaller changes in value than stocks but larger ones than bonds. Here are some key statistics:
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