Vanguard Stock Market Index Fund Experiment

Does VTSMX\VTSAX really work?

I am a millennial who has heard enough stories about those burned by stock markets. Over the past couple of decades, I have developed a fear (bordering Paranoia) about stock market investing. In early 2017, I discovered Mr. Money Mustache and the online FIRE (Financial Independence Retire Early) community. They all religiously invest in stock market.

After reading tons of blogs all advising index fund investment, I decided to wet my feet before jumping in headfirst.

The experiment: Keep money invested for 1 year in an Index Fund. See what happens.

On July 24, 2017 I invested 3000$ in VTSMX. I would see where I stand a year from then and make up my mind based on trends. I was neither looking for a raise nor a dip, I was just curious to see what would happen.

VTSMX was worth: 61.75$ as of July24, 2017.

After that, for about a month or so, every single time I logged in, my balance was less than 3000$. Then Life got busy at work and I did not check my Vanguard account for a few months. The next time I logged in was around the end of January,2018. This was a pleasant surprise as VTSMX was cruising around 71$. I was ready to call my experiment a success when the market dipped taking the price to around 65$ again.

I noticed 2 things during this dip. The price of VTSMX never went back to the price of 61$. I also had quarterly dividends (which was cherry on the cake). I forgot about Vanguard and went back to my life. The Market corrected itself and the stock prices started rising again.

1 year later VTSMX is now worth: 70.76$

Initial Investment = 3000$

Price of Investment Currently = 3437.5$

Investment Returns = 437.5$

%Investment Returns without Dividends= 14.5%

Dividends: 13-15$ every quarter.

Yearly Divided: 50$

%Investment Returns including Dividend: 16.2%

For someone who was so skeptical about the market, this is a lovely gain and I plan to invest most (if not all) of my money in Vanguard Index Fund. Once the investment hits 10k, one can convert from VTSMX to VTSAX (Admiral Shares) which has lower expense ratio.

Other Notes:

  • I was so happy in Jan about the rise of VTSMX Price that I poured some more savings into this when the dip occurred in February.
  • I am extremely happy with the way this is turning out. I do not plan to touch this account for a few years, so I am not worried about short term dips. I have a different emergency account.
  • 100% allocation to VTSAX is a risk that I am willing to take. There is a certain stock to Bond ratio that investors are advised to maintain that I am willing to ignore based on my research.
  • Had I done my experiment in any other year or even if my investments were off my a few weeks, the results could have turned out differently. But I like how the prices keep rising.
  • I shall never wait for a dip to invest money as it doesn’t seem to make sense to me.

3 Replies to “Vanguard Stock Market Index Fund Experiment”

  1. Been a loyal Vanguard investor since 2013 if I recollect correctly. I used invest 200$ per month on auto basis. And I left it that way for years and bought in bulk when it dipped and till last year I have been investing heavily every month and stopped after that due to personal emergencies and property purchase back home. I started with Vanguard small cap and now I both both small cap and vtsax. My employer 401k does not do 401k match so I took to Vanguard but as per my CPA it’s better to invest in 401k for lowering the tax so I now put most of money in there in s and p 500 index fund. I do invest in single stocks on the side as well.

    1. My Only regret is that I did not research this earlier. I find it easier to set and forget as opposed to keeping track of the market 🙂

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