An Investment Tolerancy Chart

by dd on Nov.03, 2008, under index funds, volatility

Here’s a chart that shows what certain asset groups have done over the same time period in the face of nearly a 43% loss in the Dow Jones (since its peak of around 14,100 to a low of about 8,175). Dividend reinvestments are not included. Also, some of the other indices have swung more over a different period of time because they are not 100% correlated to the Dow Jones index.

The point of this chart is to think about the loss tolerance one can take. Individual stocks and bonds can lose even more than 43%. I believe most people cannot stomach the stock loss, though they like the gains.

I tried to pick broad asset classes. I left out foreign stock investing because they are more volatile than the U.S.

	Oct 9	Oct 27	%loss	Index name
	2007	2008
VNQ	76.08	33.19	-56.4%	Vanguard REIT index
SPY	156.48	83.95	-46.3%	S&P 500 index
NASDAQ	2803	1506	-46.3%	NASDAQ composite
DJI	14,164	8,175	-42.3%	Dow Jones Industrials
PFF	47.4	27.95	-41%	Preferred stock index
HYG	104.33	66.25	-36.5%	High yield bond index
SLV	13.395	8.85	-33.9%	Silver trust
BSR	34.77	24	-31%	BearLinx Alerian index (MLPs)
30 yr bond	4.864	4.105	-15.6%	30 yr US Treasury bond
AGG	99.44	94.25	-5.5%	U.S. aggregate bond index