Last week, October 16-20, 2017, all U.S. stock indices were up due to rising company earnings and easing political uncertainty as the Senate passed a 2018 budget resolution. Rising expectations of lower corporate taxes have helped stocks rise to record highs recently. Case and point, the Dow also hit 23K for the first time ever this week. This is definitely a huge milestone for this U.S. stock index. President Trump is really patting himself on the back for this achievement too. That, obviously, irritates a number of people on both Wall Street and in Washington. The business community of America is a huge reason for the growth and President Trump has helped with the idea of a corporate tax cut.
Black Monday: October 19, 1987
Exactly 30 years ago this week (Monday, October 19, 1987) the Dow fell exactly 508 points to 1,738.74 (22.61%). This is known as “Black Monday” in the financial world. The Black Monday decline was, and currently remains, the largest one-day percentage decline in the Dow Jones Industrial Average (DJIA).
Noteworthy market news from week of October 16-20, 2017
- 52% of American’s say they’re less likely to shop on Black Friday this year.
- Netflix added 5.3 million subscribers last quarter (July, August, September 2017).
- Existing home sales were up 0.7% in September 2017.
- But… U.S. home construction fell 4.7% in September 2017.
- 30-year fixed-rate mortgage dips slightly to 3.88% this week (down from 3.91% last week).
- But… 30-year fixed-rate mortgages were only 3.52% one year ago (all-time low was 3.31% back in November 2012).
Last Week’s Stock and Bond Index Performance (October 16-20, 2017)
- NASDAQ 0.4% (YTD 23.1%)
- Dow Jones Industrial Average 2.0% (YTD 18.0%)
- S&P 500 Index 0.9% (YTD 15.0%)
- U.S. Aggregate Bond Index -0.5% (YTD 3.1%)
How Did My 401k Do Last Week?
Last week my retirement accounts were up only 0.18%, whereas the S&P 500 was up 0.86% and the Dow was up 2.0%. So last week (October 16-20, 2017) I obviously lagged the two biggest U.S. stock market indices. And, overall this year, which is 294-days into 2017, my retirement portfolio is up 14.85%.
The Vanguard Target Retirement 2040 Fund (VFORX) is up 14.96% so far in 2017. This is my personal benchmark because I could invest all my retirement portfolio into one account or choose a number of index funds to diversify. I am doing the latter and this year I am losing to the 2040 Target Date Fund. Again, slightly. But, more on why I am not using the 2040 retirement fund later.
Can I Beat the Stock Market?
I am actually not trying to “beat the market” with my retirement portfolio…I am trying to match it. I do have alternative indexes in my retirement portfolio to help possibly beat the market, e.g. Small Cap Value, REITs, International, and Emerging Markets. Through lots of reading and research on my part, I’ve found that a number of these assets classes “zig” when the market “zags”.
With that said, if I can beat the market I will absolutely take it (obviously)! Last year in 2016 my retirement portfolio returned 13.01% versus 9.54% from the S&P 500. In addition to the S&P 500, I like to measure my portfolio performance against Target Date Retirement Funds. I specifically like to use the Vanguard Target Retirement 2040 Fund (VFORX) because that is what I used to invest in before I went to all index funds. But if I can’t beat the Vanguard 2040 fund, then why not simply invest in it (one fund) versus the 10+ mutual funds I am in now? Well in 2016 the Vanguard 2040 fund was up only 8.73%. So it under performed the market (S&P 500) by nearly 1%, and I personally beat it by nearly 5%. So that tells me I am on the right track with my well diversified portfolio.
Millennial Personal Finance Blog
My goal with this Millennial personal finance blog is to show all Millennial’s that you have the power to take control of your personal finances through self-education and self-development on money and finances, and by striving to become financially literate. That is what I have been doing for years now, focusing on becoming an expert in financial literacy, so I can one day become financially independent. I’m trying to prove to Millennial’s that we can all do this and thrive with money. We Millennial’s have the greatest resource on our side to become financially independent and build wealth…time! Save, invest, and let compound interest do the rest.
Follow my blog as I highlight relevant personal finance and retirement topics pertaining to us Millennial’s. You can also join my journey as I track the true cost to raise a child these days. Most of my research shows that on average it costs $14,000 per year to raise a child, which equates to roughly $250,000 to raise a child from birth through high school (the cost of college is not included in this $250,000). I am trying to defy that price tag and show that a Millennial family can raise a child on well less than $250,000…or I will come to the sad realization that this number is dead on. Time will tell.