Using an All-in-One Fund During a Downturn

A reader writes in, asking:

“You’ve written before about using a Vanguard Lifestrategy fund for your retirement savings. Have you been happy with its performance through all of the volatility this year? Do you think it has made it easier to ‘stay the course’ as Bogleheads say?”

To be clear, my level of satisfaction with the fund is not really a function of its performance. It’s just a fund of index funds. And because we use the LifeStrategy Growth fund, it has a mostly-stock allocation (80% stock, 20% bond). So if the fund is doing well at a given time, that’s just because the global stock market is doing well, not because of anything brilliant about the fund.

Similarly, when the fund is performing poorly (e.g., Feb-March of this year), that’s not a failing of the fund. It’s just what happens when you own index funds and the market performs poorly.

Having said that, yes, we are happy with the fund. And yes, it probably has made it somewhat easier to “stay the course” through all the volatility.

It has been nice not to have to think about when to rebalance or anything like that. All we’ve had to do is just keep putting money into the same fund (i.e., precisely the same thing we’ve been doing since we began using the fund ~8.5 years ago). It’s a very low-stress, low-hassle way to save and invest.

Granted, I imagine that if I were using a DIY allocation, I still would have been able to calmly continue with the plan (i.e., continuing to contribute and rebalance). I had no trouble doing so in the bear market of 2008-2009, and that was a worse decline (in terms of percentage).

And, to be clear, the behavioral/psychological benefits that I’ve experienced with the LifeStrategy fund are not particular to LifeStrategy funds. They’d be just as applicable to any “all-in-one” fund, including target-date funds or balanced funds.

And finally, the same caveats as always apply: