Saturday, January 2, 2021

Being Smart With $$ -- Did You Get the Returns You Deserved in 2020?


 

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.