Being Smart with $$ - Did You Earn What You Should Have in 2023?

 

With another year of investing coming to an end, did your adviser help you or hurt you?  Many advisers boast about a year where they achieved a 10% return on your investment portfolio, or maybe a more-impressive 12%?  Before you send out a thank-you note, those returns may be far less than you should have earned.  A simple investment in the Vanguard Target Retirement 2040 Fund (for those around age 50) returned over 18% in 2023.  The 2030 Fund (for those around age 60) earned around 16%.  While your circumstances and risk profile may be somewhat different than others who are the ages mentioned above, this comparison may put your 2023 performance in perspective.  These Vanguard target date funds are static, low-cost portfolios without a manager guessing what to buy and sell.  Many advisers claim they have a special ability to give you extra returns but quite a bit of research suggests that very few advisers 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.  This year, most advisers started the year telling you the stock market would fall and kept clients below their typical target allocation for stocks which has cost you money.  Money not earned for guessing wrong is just as bad as money lost when the market falls.  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 $80,000 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 a new adviser who doesn’t time the market or make false claims that he or she 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. 2023 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.

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