Revisiting Grandchildren & 401(k) Contributions with Positive Dollars of Return

2009_08_17 Grandkids

A while ago, we published a dollar-cost-averaging article that used my grandchildren’s investment accounts to illustrate why people should continue periodic contributions to 401(k) and other investments through bear markets.  Their first year of investing, 2008, had pretty grim results.  The dollars of investment results have already turned positive.  It is time to update a paragraph written just three months ago.

June 18, 2009 – For twelve months, through May 31, 2009, their return was -29.97%.  In dollars the loss is about a bicycle and a half [since the accounts were opened].  It is far better than 3.5 bicycles for their twelve month report at Christmas 2008.  The mutual fund itself, without dollar-cost-averaging, had a return of -31.42% for twelve months through May.  Dollar-cost-averaging alone explains this 1.45 percentage point improvement.  Over a lifetime of work and contributing to a 401(k), this difference can be huge.  My goal is to teach these kids this lesson by the time they are ready to build their own wealth.  There is more to money than money

September 10, 2009 – For twelve months, through August 31, 2009, their return was -17.06%.  In dollars, these accounts have gained about a bicycle from investment results since they were opened.  The complete June 18 article can be found at Grandchildren and 401(k) Contributions.

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