If the Vanguard REIT Index Fund (VGSIX, or its EFT share class VNQ) were a person, I’d say he must have bipolar. In the past few weeks, its prices changed from one end to another in rapid cycles. It could not make up its mind whether it wanted to go up or go down. One week it was in mania, up 30%; the next week it was in deep depression, down 30%; up again, down again, like crazy. Up or down 30% in a year would be quite volatile. To have it happen in a week, five weeks in a row, is just pure madness.
The REIT index fund’s standard deviation of daily price changes in the last few weeks was 9.3%. That’s even higher than the same on Vanguard sector funds Vanguard Precious Metal & Mining Fund (VGPMX) and Vanguard Energy Fund (VGENX). Although some people consider REIT to be a separate asset class, it is behaving like a sector fund lately.
Here are the recent Net Asset Value changes for the Vanguard REIT Index Fund (VGSIX):
|Dates||Trading Days||NAV Changes|
|10/27/2008 – 11/4/2008||6||+28%|
|11/4/2008 – 11/12/2008||6||-24%|
|11/12/2008 – 11/13/2008||1||+11%|
|11/13/2008 – 11/20/2008||5||-32%|
|11/20/2008 – 11/26/2008||4||+34%|
|11/26/2008 – 12/1/2008||2||-21%|
|12/1/2008 – 12/5/2008||4||+29%|
|10/27/2008 – 12/5/2008||28||0%|
The funny thing is, after all the wild swings, the NAV is unchanged from what it was five weeks ago. It almost tempts you to become a trader: [dream on] buy low, sell high, buy low, sell high, buy low … … In a few weeks you more than double your money. [dream over]
Or is it called rebalancing? Who wants to bet it will be up or down another 20% again shortly?
Say No To Management Fees
If an advisor is charging you a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice: Find Advice-Only.