Investment Portfolio Research: Lazy Portfolios (5): Realized and Unrealized Gain/Losses of The Individual Funds

Wednesday, February 25, 2009

Lazy Portfolios (5): Realized and Unrealized Gain/Losses of The Individual Funds

Following the recent stock market crash, The stock and international funds suffered heavy losses. Many mutual funds frequently make year-end capital gains distributions. Lat year, many of them distributed the realized losses by the end of the year. You can also sell your funds that suffered heavy losses so you can use the realized losses to offset the realized gains (if any) for tax purpose. This is called "Tax Loss Harvesting". However, many of the funds also have some unrealized losses carried over from last year. How big the unrealized losses could be?

The realized and unrealized capital gain or loss can be found from Vanguard's website under Fund Distribution tab for each of the fund. Here are the results for the individual funds making the Lazy Portfolios.

As of 1/31/09, the US stock funds have realized capital losses of -5% to -115%. The unrealized appreciation/depreciation ranges from -2% to -275%. The worst funds that have huge total realized and unrealized losses are: Vanguard Small Cap Value Index (VISVX): -346.85%, Vanguard Small Cap Growth Index (VISGX): -288.10%, Vanguard REIT Index (VGSIX): -282.84%, Vanguard Value Index (VIVAX): -186.10%. In comparison, the Vanguard 500 Index (VFINX) and the Vanguard Total Stock Mkt Idx (VTSMX) have total losses of -11.15% and -43.80% respectly.

Most of the international funds have total losses ranged from -46% to -69%. The only international fund that carries the worst loss is the Vanguard Pacific Stock Index (VPACX), a huge loss of -315.89%.

These numbers look very scary. How many years will it take for the funds to recover the heavy losses even in good times, let alone in a worst recession of our life time?