How did your portfolio do in 2019?
“Good” may not be good enough.
Many will look at returns of 10% or more and
send their adviser a thank-you note.
But
any percentage return is irrelevant unless you compare it to returns you should
have earned based on market performance and your personal circumstances.
If you are 50, you may compare your portfolio
return to Vanguard’s Target Retirement 2035 Fund which gave investors a return
of over 22% in 2019.
While your circumstances
and risk profile may be somewhat different than others who are 50, this
comparison may put your 2019 performance in perspective.
Are you 55? The Vanguard 2030 Fund returned over
21% in 2019.
As many advisers I meet
tell me they can time the market to improve performance, the comparison of your
portfolio to these Vanguard funds may put these advisers’ claims to the
test.
If you paid high fees to an
adviser for a 15% return this past year, then your $1 million portfolio may
have earned $50,000 less than it should have, not to mention the $10,000 in
fees you may have paid.
The market doesn’t
go up over 20% most years and missing the years it does by trying to time the
market can be quite painful.
There is an
old adage that says that success in the markets is not about timing the market
but instead it is about time in the market.
A steady investment plan over the decades before retirement and the decades
in retirement lets you earn high, long-term returns and requires that you ignore
short-term volatility.
If you earned
returns this year that were well below those provided by Vanguard target
retirement funds matching your horizon, then you might want to question your or
your adviser’s investment strategy.
(Past
performance may not be an indicator of what to expect in the future and your
individual circumstances should be considered in any investment choice. 2019
market returns are far higher than historical averages.)
Larry Pike, CFA
Client Priority Financial Advisors LLC
www.clientpriority.com
