2020 was an insane year in the financial markets. So, after everything, how did your portfolio
do? Did you lose money? Did you realize a 5% return on your
investments this year? Or perhaps a more-impressive 10%? Before you send your financial adviser a thank-you
note, you should know that a simple investment in the Vanguard Target
Retirement 2035 Fund (for those around 50 years old today) returned
almost 15% in 2020. While your
circumstances and risk profile may be somewhat different than others who are
50, this comparison may put your 2020 performance in perspective. Are you 60? The Vanguard 2025 Fund returned
over 13% in 2020. Many advisers claim
they have a special ability to give you extra returns but much research
suggests that the majority of advisers are unlikely to beat the markets after their
high fees are taken out. If you are 50
and paid 1% of your assets in fees to an adviser for a 10% 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 for poor
advice. Those who tried to time the
market this year mostly got a lesson in what doesn’t work. 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. Consider
speaking to an hourly, fee-only adviser who doesn’t time the market. (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. 2020 market returns were higher than
historical averages.)
Larry Pike, CFA
Client Priority
Financial Advisors LLC
www.clientpriority.com
Hourly, Fee-Only Financial Planning
and Advice.
No Commissions. No automatic, annual fees.
