You work excruciatingly hard, setting money aside to pave the way toward a bright and promising future… then BAM! You see an international pandemic strike your local community. Not only do the direct lifestyle changes irritate your mood, but what impact is this world scare doing to your potential future? I truly believe it is a smart move investing into a Roth IRA account at a young age, saving up for a solid retirement. With that said, how frustrating would it be to see it all whither away? I want to dig deeper into my Roth IRA account and explore what this virus scare is doing to stocks and investments.
I personally invested into a Vanguard Roth IRA account in 2019 when I was 24 years of age. I already had a savings prior to that, but pulled that money and invested a portion into my business and the other portion into the Roth account.
Now fast forward to 2020, investing for a year, I managed to invest a small chunk into the account. The rule of thumb is to deposit $100-200/month minimum at an early age (approx 20-28) to achieve a nice lump sum at retirement. If you don’t understand what a Roth IRA account is, it is basically like a 401(k) where the rate of return provides a kickback each month based on how your stocks, bons, ETFs are doing. If stocks increase, your kickback is higher, but if they dip your kickback is lower or you can even lose money. The difference between a Roth and a 401(k), is that when the Roth pays out for retirement, the money is not taxes because it is pre-taxed money. You were taxed on it with your annual taxes, so it is not considered when it is pulled. Now, you are also not taxed on the back-end of the Roth from your “gain” or returns. Meaning anything you profit from the accumulation of the rate of return is not taxed. How awesome, right ?! OKAY, time to glance at my account and the impact that the virus had on my account.
I decided to invest into VTINX, the Vanguard Target Retirement Income Fund Investor Shares. If you look at the trend, the rate of return seemed to be on the rise, from the 3yr overall at 5.37% and the 1 year overall performance at 8.11%. Now, looking at the current rate, we see -6.34%, meaning not only did it drop, but we are losing money at the money. Will this trend continue? Are we at high risk and need to pull our money?
This diagram is also presenting the % of change in pricing. Showing the decline in value of the shares.
Here, the diagram displays the progressively increasing rate of returns over the year time frame. As you can see, returns were on the rise almost in a linear and constant form. I had invested in a low risk, constant return share, and I truly believe it still is.
All in all, I am seeing a huge dip in return rates, as well as the returns even being in the red and losing money. The international pandemic is greatly impacting our stocks and overall form of trade. I do only see this as a bump in the road, and might be a way for individuals to invest in low priced funds at the moment, that will increase as the pandemic hopefully vanishes and trade begins to increase again.