The market declines investors faced in the first quarter as a result of the coronavirus pandemic are much more muted when compared to a longer time frame. That's the key takeaway from a Vanguard paper released Monday.
During the first quarter of 2020, both retail and defined contribution plan investors posted asset declines of 14%. However, when compared against the full one-year period ended March 31, declines for retail and retirement plan investors with 100% equity allocations were only 7% or 8%, the paper found. Defined contribution investors with equity allocations of less than 75%, in fact, saw their wealth increase or stay the same due in part to ongoing contributions, according to the findings.
When the time frame is widened to three years, the picture improves even more, with nearly all investors seeing increases in wealth. Defined contribution plan investors with equity allocations between 1% to 25%, for example, saw market gains of 20%, while retail investors reaped gains of 11%.
"A long-term perspective can provide context and peace of mind, helping investors remain disciplined and avoid over-reacting to short-term declines like we've recently experienced," Jean Young, senior research associate with Vanguard investment strategy group and author of the paper, said in a statement.
The paper analyzed 6.5 million Vanguard defined contribution plan and retail investor accounts of continuous investors between March 31, 2017, and March 31, 2020.
