Tuesday, January 22, 2013 - 6:49 PM

Slow And Steady (Won The Race)

Just for fun, I just compared the growth of $10,000 over the last six years if (a) 100% invested in VTSAX (Vanguard's low-cost total stock market fund) or (b) 100% invested in a CD ladder with an average effective yield of 4%, compounded. I used a Morningstar "growth of $10,000" chart for VTSAX and a rough guess of an "average" of 4% based on my own ladder since January, 2007.

VTSAX: $10,000 => $11,825 (with most of the increase in 2012)

CD Ladder: $10,000 => $12,653

When you hear the folks on CNBC crowing about "five year highs" in the stock market, flip it around. Were it not for dividends re-invested and 2012, stocks would have been dead money. Even so, that CD ladder still won the race.

It always helps to be diversified.

Bozo129 posts since
Feb 14, 2011
Rep Points: 859

1. Tuesday, January 22, 2013 - 11:01 PM

1. 6-year may not be a fair period for comparison since stock holding is for long term time horizon.

2. I am not sure that the 4% laddered CD average return is obtainable in the present low-interest rate climate.

51hh1,041 posts since
Jan 16, 2010
Rep Points: 4,754

2. Wednesday, January 23, 2013 - 7:48 AM

It was meant to be somewhat ironic (re-read the penultimate paragraph and the last sentence).

Point being, the financial wags don't say "dead money has turned the corner".

Bozo129 posts since
Feb 14, 2011
Rep Points: 859