In case you’re invested in the stock market, either via single stocks or via ETFs (my preference), you’re probably feeling a lot of pain right now.
As of Friday, June 17th, my ETF portfolio has dropped 10.085€ (-6.43%) in value within just the last week. Not only that, the year-to-date performance so far is looking even worse, standing at -16,83% in less than six months.
That’s why I decided to take a closer look at the ETFs my wife and I are invested in, to give you my thoughts on the market right now and review some historical data for our main ETF, to hopefully put things into perspective.
Please don’t forget that none of this is investment advice, just my personal opinion based on my own experience as an investor.
Our 145.837€ ETF Portfolio
Let’s start by looking at our ETF portfolio, which has taken a nose-dive since the start of 2022. As of June 17th (11:30 AM), we’re down 29.511€ year-to-date:
That’s -16,83% within less than 6 months.
Needless to say, if you only started investing into ETFs somewhat recently this or last year, you’re likely not feeling too happy about the state of your portfolio.
Our portfolio is hit especially hard, since we bought most of our shares towards the end of 2021 and early this year, when share prices were at an all time high. Then again, you never know which direction the market is going beforehand.
Here’s some context in case you are new: We’re only buying a single ETF, the accumulating Vanguard FTSE All World (ISIN: IE00BK5BQT80, Ticker: VWCE) since January 2021.
However, we’re keeping our existing shares of the distributing version of the same ETF as well as the xTrackers MSCI World, which we bought between 2017-2020.
Putting Things Into Perspective
Then again, I believe it’s always useful to put things into perspective. It’s a lot better to experience something like this early on in your investment career, to find out how you feel and react when the market is down.
Let’s not forget, this is a completely normal part of investing in the stock market. Not only that, ETFs should always be treated as a long-term investments anyway.
As I’ve often said before, you should have a time horizon of at least five years, ideally ten years or more.
According to Portfolio Performance, the free tool I use to track our investments, our ETF shares are still up a total of 14.469€ in value since 2017.
You can find more details like our IRR and our monthly & yearly returns in this part of my video.
Vanguard FTSE All-World Historical Performance
In moments like these, it also helps to look at some historical performance data. Here are the monthly returns for the Vanguard FTSE All-World (in €) since 2013:
And these have been the returns from 2018-2022 (left), as well as over the last month up to the last three years (right):
Next, let’s also have a look at the FTSE All-World’s performance since 2005 using Backtest by Curvo.
A 10.000€ investment into the FTSE All-World in March 2005 would have turned into 44.187€ by April 2022, the latest currently available calculation date:
That’s more than a 4x within 17 years, even with the financial crisis of 2007-2008 in between.
Historical Performance Continued – MSCI ACWI
We can also look at the MSCI ACWI (All Country World Index), which is very close to the FTSE All-World in its composition and performance.
According to MSCI, it averaged 6,65% per year from 31.12.1998 until 31.05.2022:
In this case, even with the dot-com crash in the early 2000s in addition to the financial crisis, we would still have seen annualized returns of 6,65%/year.
With average returns of 12,42%/year, the stock market performed exceptionally well over the last ten years, so a correction or crash like the one we’re seeing right now was bound to happen at some point.
My ETF Strategy and Thoughts Going Forward
Based on long-term historical data, I’m expecting average yearly returns of 7% from my globally diversified ETF long-term, with lots of rallies and crashes in between.
At the moment, I’m kind of biting myself in the ass that we don’t have extra funds to invest into the market at what I consider a nice discount for the long run.
But, that’s life and right now we need to keep higher cash reserves. We’re about to move to a larger apartment and we need everything to be ready for our first baby, which should be born in October.
Look, nobody knows what the market is going to do on a daily, weekly or monthly basis. And ETFs are a long-term investment anyway, so it shouldn’t really matter.
I also understand how much nicer it feels to be able to show off our impressive returns in order to easily justify our investment decisions to others. But market corrections or crashes are part of the journey, and while nobody enjoys going through them, they’re unavoidable.
At the end of the day, you’re a lot more likely to have good long-term returns in the stock market if you just stay invested or continue to buy more shares on a regular basis, no matter what the latest news headline might try to scare you with.
There’s an old saying you’ve likely heard numerous times: Time in the market beats timing the market.
All the information we have right now is that the market is priced 17% lower compared to the start of the year. When looking back one day, this could be a great discount opportunity, to get more shares of the most productive companies in the world at a lower price.
As for my wife and I, we haven’t sold any shares and weren’t planning to, since we’re investing for the long run anyway. But hopefully we’ll have some more disposable cash over the coming months to continue our monthly Vanguard FTSE All-World ETF investment strategy.
This Too Shall Pass
It’s important for me to not only share with you when things are going extremely well like last year (+29%), but also be open and transparent throughout periods where ETF investing is a lot less fun and our portfolio value is taking a nose dive. I hope I’m able to get that across to you.
These highly volatile periods, filled with fears and uncertainty about the future are part of the investing journey. However, I’m confident this too shall pass.
How are you feeling right now about your investments, especially stocks and ETFs?
ETFs Keep Dropping – Do This Now (Video)
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thank you for your insights
but maybe it is a good thing you dont have money available to “grab the opportunity” as this may very well turn into a grabbing the falling knife .. interest rates are going up, inflation is real and maybe we haven’t seen the bottom of it yet
This all depends on what the ECB, FED etc going to do next… printer is ON markets go up, printer is OFF markets go down
You’re very welcome, Nuno!
Sure, you never know.
Good post. Price reductions merely increase future expected returns (the opposite is also true).
Good luck. We’re on the same boat.
Thank you! Wishing you all the best as well!