Consider the big picture
during periods of market stress
Client note
Short-term stock market volatility can cause us to lose
perspective. In times of market volatility, you may see
alarming fluctuations in your account balances, making
it tempting to adjust your asset allocation in search of
calmer waters. Yet it’s important to consider the
performance of a balanced portfolio over time
(shown below).
Volatility is a fact of life
5%
Cuban missile crisis,
JFK assassination
4
Black Monday
Russian
debt default,
Long-Term
Capital
Management
bailout
3
Global
financial
crisis
2
1
0
1960
1970
1980
1990
2000
2010
30-day S&P 500 Index average price movement, 1960 –2012
Source: The Vanguard Group, Inc., calculations, using data from Standard & Poor's, Bloomberg and Thomson Reuters Datastream.
The importance of maintaining discipline: Reacting to market volatility can jeopardize return
140%
Cumulative return
120
100
132.0%
104.5%
94.3%
86.1%
80
60
50.1%
40
20
11.1%
10.6%
0
1.6%
14.3%
–5.1%
–20
–27.1% –26.7%
–40
Bull market:
March 2003–
May 2008
Bear market:
June 2008–
February 2009
Portfolio never rebalanced;
all stocks sold on January 1, 2009
Bull market:
March 2009–
March 2011
Bear market:
April 2011–
December 2011
Bull market:
Jan. 2012–
Dec. 2013
Full period:
March 2003–
December 2013
Portfolio rebalanced semiannually
Notes: The initial allocation for both portfolios is 60% Canadian stocks, 40% Canadian bonds. The rebalanced portfolio is returned to this allocation at the end of each June and
December. Returns for the Canadian stock allocation are based on the S&P/TSX Composite Index. Returns for the bond allocation are based on the Barclays Canada 300 Index.
This hypothetical example is for illustrative purposes only and does not represent any investment.
Source: The Vanguard Group, Inc., using data provided by Thomson Reuters Datastream.
Connect with Vanguard ™ > vanguardcanada.ca
Date of publication: May 2015.
This material is for informational purposes only. This material is not intended to be relied upon as research, investment, or
tax advice and is not an implied or express recommendation, offer or solicitation to buy or sell any security or to adopt any
particular investment or portfolio strategy. Any views and opinions expressed do not take into account the particular investment
objectives, needs, restrictions and circumstances of a specific investor and, thus, should not be used as the basis of any specific
investment recommendation. Please consult your financial and/or tax advisor for financial and/or tax information applicable to
your specific situation.
Information, figures and charts are summarized for illustrative purposes only and are subject to change without notice.
All investments, including those that seek to track indexes, are subject to risk, including the possible loss of principal.
Diversification does not ensure against a profit or protect against a loss in a declining market.
Vanguard Investments Canada Inc.
Bay Adelaide Centre
22 Adelaide Street West
Suite #2500
Toronto, ON M5H 4E3
© 2016 Vanguard Investments Canada Inc.
All rights reserved.
CBPMSC 402016