Hi,

I've had the same investment person for years. I do all of my IRA/mutual funds through her and when my employers switch 401K companies she usually advises as to how much of each fund to buy into.

About two years ago I switched jobs and she convinced me to rollover my 401K into her company where I have my IRA funds. She told me the other day that I had a good yearly return of about 11%.

I remember years ago, before all of the economy became all weird that I got a 16% return on my 401K one year. I don't keep records so I am a little bit unsure of that figure.

Anyway, I do realize the economy is different now and that if I got a higher return years ago it was the result of her advice as well.

My question is, for 2012/2013 is 11% really a good return on mutual funds/401Ks/IRAs?

My fund distributions have always been on a model of "Safe, but with a small percentage of volatile"

Have a good weekend

Steve

Two points:

1) If she convinced you to roll the 401k over to her company it probably means she's making money off your investments, so you need to find out whether that "11% return" is before or after whatever she skims off the top, and also whether that return is before or after whatever management fees are built into the funds themselves.

2) When you're investing for a long-term goal like retirement, the rate of return you earn in a given year doesn't matter. It's going to vary every year and your goal isn't to maximize your return every year. Your goal is to maximize your return over the entire time horizon of your investments. When you hit retirement age, your goal is that your overall pot of money will have grown as much as it could have. This means you need to look at it from the point of view of probabilities: what strategy has the best balance of return vs. risk and is most likely to give you the best final result when you start needing the money?

Study after study shows that this strategy is a balanced portfolio of index funds and bond funds. Your advisor will tell you that you can do much better than simply aiming for the average returns of the market, but it's like smoking: everyone knows of a few smokers who lived into their 90s and never had any major health problems; based on that knowledge you might conclude that smoking is safe. But if you look at the population of smokers as a whole, you discover that the majority of them die young or have debilitating illnesses in their later years. Similarly, if you look at the universe of mutual funds, you find that fewer than 20% of them end up beating the S&P 500 index over the long term. Sure, your advisor might think she can pick funds that lie in that minority group of winners, but picking them is not much easier than picking the smokers who will survive into their 90s from a group of smokers in their 40s.

If you want the best chances of living a long life, you shouldn't smoke. Not smoking doesn't guarantee that you won't die young, but it reduces your risk. Same goes for investing: with something as important as your retirement investments, you want the optimal balance of risk and return. If you're willing to live dangerously, that's fine, you just need to be aware of the risks and accept that when all is said and done, you could either be fabulously richer or fabulously poorer than someone who took the "boring, average" route of index funds and bonds.

Have you considered that perhaps the higher returns years ago were due to the economy, years ago?

Considering that the 1-year return for the S&P500 as of Friday was 14.76%, I can't say that I'm impressed.

11% is a great return if you got that in 2008, but last year see previous statement. You have compare apples to apples. Whatever return, compare it to the S & P average to see how yours compared. And also had been mentioned, is that before or after fees, etc.
I think you need to do a little more self-education where you have your money.

To be fair, the OP said his portfolio allocation is conservative, with only a small percentage in equities, so you can't expect those returns to compare with those of the market. That would not, in fact be comparing apples to apples. In 2008, someone with his portfolio probably would have beaten the S&P 500 quite handily.

Eleven percent actually seems pretty awesome return for a conservative portfolio, which presumably is mostly made up of bond funds with a small portion of equities.

I think a better question to be asking is what fees did your adviser charge you last year. And don't accept "0" as the answer. The advisor might have been paid by teh funds you own. In that case a good followup question might be "are there similar funds I can buy instead with lower expenses so that I keep more of my own money every year?"

That 11% is probably after all fees were taken since us Investment Advisors are required by law to report gains after fees were taken.

Here is the key point, the S&P 500 was actually up 16% when you reinvest dividends and all so her returns lagged the market. With mutual funds she will never beat the market. She will buy many mutual funds in your account and ride the market up and down and take fees for advising and so will the mutual fund. Unless she can make up this difference shorting the market, or making money on the downside you are probably better off buying an S&P 500 index mutual fund (or better yet ETF) and saving the money on fees.

My program shorts the market on down turns so its much easier for me to beat the market but if you buy and hold in mutual funds its not likely she will ever beat the market. You can just as easily sit out the sell offs but those types of advisors don't do that because they get kick backs from the mutual fund companies.

www.GoldbergFinancialLLC.com

I humbly suggest that you avoid being "sold anything" there is really isn't any reason to be. Invest your funds in some low cost mutual funds like vanguard - S & P 500, Growth and Income, Equity Income and international are three I own. Low administration fees, zero exit fees and diversity are the ticket!

2012 was a great year for the market trye but Over time study after study shows Most funds won't beat he average market returns... To chase one is folly..

Good luck You are on your way just by saving.