Growth vs Income

Yes, on average, stocks are down for the week.  Brutal two days of selling put the S&P 500 Index into the red for the year.  The % changes in the Dow, S&P 500, and the Nasdaq are front and center on all three financial channels.  However, what they won’t’ show you on TV is how bond prices did, they might show you what interest rates did but not bond prices.

Let’s take a look at what high-quality bonds did this week:

  • iShares Core US Aggregate Bond ETF up .02% (ticker:  AGG)
  • iShares 7-10 Year Treasury Bond ETF up .43% (ticker:  IEF)
  • iShares MBS ETF up .15% (ticker:  MBB)

The chart below shows the weekly performance for the week for the above funds and the SPDR® S&P 500 ETF (ticker:  SPY).

AGG_IEF_LQD_MBB_SPY_chart

Most portfolios are down for the week because a 4.35% drop is a steep decline no matter how much exposure you have to stocks.   The 60/40 portfolio (60% SPY – green line and 35% AGG – blue line) this week lost 2.60% for the week.

It’s important to remember that portfolios are designed for “growth” and “income.”  Good financial planners and asset allocators will create an asset allocation that fits the time horizon, short-term cash needs (1 year), and risk tolerance and behavior of their clients before putting a single dollar to work in the markets.

I urge you to tune out the daily swings as much as possible.  The markets tend to move up like an escalator or in steps and move down like an elevator, in other words, “risk” happens fast.