The books are closed on 2021. So, how
did your portfolio do? Did your adviser
boast that he or she earned you a 7% return on your investments, or maybe a
more-impressive 10%? Before you send out
a thank-you note, those returns are less than you should have earned for most
people. A simple investment in the
Vanguard Target Retirement 2035 Fund (for those in their early 50s) returned over
13-1/2% in 2021. The 2045 Fund (for
those in their early 40s) earned over 16%.
While your circumstances and risk profile may be somewhat different than
others who are in their 40s or 50s, this comparison may put your 2021
performance in perspective. Are you 60?
The conservative Vanguard 2025 Fund returned almost 10% in 2021. And these are all static portfolios without a
manager guessing what to buy and sell. 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. And what’s worse, many guess wrong
on market direction and cost you a fortune in lost earnings. 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 $35,000 less than it should have and then you paid $10,000
in fees on top of that for poor advice. 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
adviser’s investment strategy and why you are paying such high fees for someone
who shouldn’t be gambling with YOUR money.
Consider speaking to an hourly, fee-only adviser who doesn’t time the
market or make false claims that he has a crystal ball. (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. 2021 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.
