Does my rate of return suck?

[Jtrey17]

I have a 401k through my employer. The rate of return from 2002-current is 7.35%. Other info that might be of interest: I’m about 85% stocks, 15% bonds. I paid about 10% to my ex during divorce. Not sure if that factors into the return rate.

My question to you all: is that rate super-low? It seems to be, to me. Especially when I hear Dave saying 12 and 13% is normal. Feels like I’m missing out on a bunch of money, you think?

[bacchi]

Forget Dave. He's exaggerating.

What kind of stocks? International, S&P, small cap, emerging markets, utilities, etc.?

[ChpBstrd]

Not at all. According to the following calculator, the S&P 500 with dividends reinvested had a 6.81% annualized return (CAGR) between Jan. 2002 and Dec. 2018. But that would have been the return of a lump sum investment, not a series of small investments over 17 years. Your personal performance probably exceeds that because you had increasingly more money invested over time and returns have been particularly outstanding during the past 10 years when you had a lot more at stake than you did in 2002 or 2008.  Your annualized return is especially impressive considering you had a bond allocation and probably some high fees weighing it down. In fact, it seems almost suspiciously high, so I'd look into how it was calculated. Ensure they are using CAGR, not the simple average of each period's returns.

Also, 12-13% annualized returns over 17 year periods are not normal or to be expected.

http://www.moneychimp.com/features/market_cagr.htm

[TexasRunner]

This can help:  https://dqydj.com/sp-500-return-calculator/


This shows a S&P500 ETF should have returned (with dividends reinvested) 8.285% MINUS whatever expense ratio you are charged.

If its vanguard, then 8.285% MINUS 0.05% or 8.235% Return.
If its <insert random shitty high fee 401k provider here that your company picked>, then 8.285% MINUS 1.75% Expense Ratio or 6.535% Return...

Thats why low fees are so ridiculously powerful...

1) Are you in ETFs or High Expense Ratio Mutual Funds (like your friend **cough** **cough** Dave Ramsey suggests)?
2) Does your 401k / Account Provide have front-end fees for deposits?

[Jtrey17]

Ok here’s a breakdown (Schwab)
Schwab INST LC Val Teust Fd Cls I $44,000 large
BNY Mellon Broad Market Stock Index Fund Instl $37,000 large
BMY Mellon Small Cap Stock Index Fund Instl $44,000 small
Jennison Small/Mid Cap Equity Fund CI 2 $21,000 small
Artisan International Growth Trust Tier 3 $45,000 international
(My employer) $10,000 I move this out occasionally large
PIMCO Total Return A $30,000 bond

Total: $229,000 approx

I vaguely remember picking stocks based on their lifetime averages years ago. Through the years the choices have changed and I never looked at the return rates for the new choices my employer offered and moved my money into.

Thank you for the replies-think I should continue to stay the course?

Forget Dave. He's exaggerating.

What kind of stocks? International, S&P, small cap, emerging markets, utilities, etc.?

[Jtrey17]

It’s schwab 😕. And am embarrassed to admit that I don’t know the answers to your questions. But am gonna find out!

This can help:  https://dqydj.com/sp-500-return-calculator/


This shows a S&P500 ETF should have returned (with dividends reinvested) 8.285% MINUS whatever expense ratio you are charged.

If its vanguard, then 8.285% MINUS 0.05% or 8.235% Return.
If its <insert random shitty high fee 401k provider here that your company picked>, then 8.285% MINUS 1.75% Expense Ratio or 6.535% Return...

Thats why low fees are so ridiculously powerful...

1) Are you in ETFs or High Expense Ratio Mutual Funds (like your friend **cough** **cough** Dave Ramsey suggests)?
2) Does your 401k / Account Provide have front-end fees for deposits?

[JZinCO]

I don't know how to word this well but can I mention that I think you are asking the wrong question?
'Does my writing suck?' is a fair question. But your rate of return will reflect the performance of your asset allocation minus any fees.
Your question should be 'Does my asset allocation suck?' and that would be answered by looking at the distribution of expected returns (looking at it as a distribution accounts for variance across different horizons or start-to-end dates). If the expected returns and risk are not acceptable then the asset allocation sucks. If there is a better way to get the same returns with less risk, then the asset allocation sucks.

I'm not trying to be rude. I'm just saying 'This is my return. How does it compare?' is a dangerous game. That's the same concern that leads towards a behavior of selling low and buying high as well as a dismay for investing when the market is bearish.

[TexasRunner]

Not just that, its a matter of what the expense ratios and fees amount to.

Post up your expense ratios for each different fund and we should be able to help.  It seems that information is hard to come by from the public side of their info...

[MustacheAndaHalf]

My question to you all: is that rate super-low? It seems to be, to me. Especially when I hear Dave saying 12 and 13% is normal. Feels like I’m missing out on a bunch of money, you think?

When you're getting out of debt, Dave Ramsey can be a great help.  But he does not know investments - he may even have some conflicts of interest where the people he recommends pay him money.  Once you have money to invest, you need a new guru.  I'd recommend "A Random Walk Down Wall Street", which uses decades of stock market history to make its points.

Sometimes the stock market will earn 13%, like Vanguard Total Stock Market did for the past 10 years... but that level of return assumes you predicted the 2008 crisis and invested immediately after it.  It's not realistic, and reflects the fact that most of the damage from the 2008 crisis falls off when 10 year performance only goes back to 2009.

For the past 5 years, Vanguard Total Stock Market earned 8%/year.  Dilute that with 15% bonds and you're close to that number.  Also keep in mind that's the entire stock market.  There's no missing out - that's buying everything.
https://investor.vanguard.com/etf/profile/performance/vti

[theolympians]

OOOKay, admission here. We have an EJ account which we have had for years. First, a little back story. I fully fund my 401K and, this year, a separate Roth. The Roth is with EJ, as is is my wife's Roth and traditional IRAs, and the kids educational savings.

Recently EJ implemented "Guided Solutions". It was explained that the company takes a cut off the top (around 1%). The sales pitch for this is it eliminates the commissions for sales and purchases, thereby making more frequent trades financially easier.

We are buy and hold types for the most part, so the frequent trades aspect doesn't impress. Looking at my account activity, they ding monthly now, which is getting irksome. The wife and I are prospecting for another option. TD Ameritrade? E*trade? Any suggestions.

I realize we just got way off topic....

[chasesfish]

The other thing we don't know is the timing of the income earned, ect, and how much was contributed when.

At $229,000 over the working career, the poster is not putting in the full $18,500 per year.

[Catica]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

[bacchi]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Over what period? A month? A year? Since 2002?

[JZinCO]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Yes. Sell, sell, sell. Get out while you still can!

Or, as I said before, select an asset allocation that you can be comfortable with (it may mean missing out on the best gains so you don't have to experience the worst drops). This takes some real effort and reading up.
I did when I developed my investor policy statement (ips). Were I to get concerned, my ips has a little diagram from Tyler's portfolio Charts that shows how variable the market can be.  And my ips tells me what to do, which 99% of the time is STAY THE COURSE.

[Catica]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Over what period? A month? A year? Since 2002?

Since I transferred all my assets to Vanguard in March 2018. 

[Catica]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Yes. Sell, sell, sell. Get out while you still can!

Or, as I said before, select an asset allocation that you can be comfortable with (it may mean missing out on the best gains so you don't have to experience the worst drops). This takes some real effort and reading up.
I did when I developed my investor policy statement (ips). Were I to get concerned, my ips has a little diagram from Tyler's portfolio Charts that shows how variable the market can be.  And my ips tells me what to do, which 99% of the time is STAY THE COURSE.

I prefer to stay the course.

[bacchi]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Yes. Sell, sell, sell. Get out while you still can!

Or, as I said before, select an asset allocation that you can be comfortable with (it may mean missing out on the best gains so you don't have to experience the worst drops). This takes some real effort and reading up.
I did when I developed my investor policy statement (ips). Were I to get concerned, my ips has a little diagram from Tyler's portfolio Charts that shows how variable the market can be.  And my ips tells me what to do, which 99% of the time is STAY THE COURSE.

I prefer to stay the course.

Is it a sensible AA in index funds? Or is it invested in bitcoin and ripple and marijuana stocks?

[OrchardTree]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

[Catica]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Yes. Sell, sell, sell. Get out while you still can!

Or, as I said before, select an asset allocation that you can be comfortable with (it may mean missing out on the best gains so you don't have to experience the worst drops). This takes some real effort and reading up.
I did when I developed my investor policy statement (ips). Were I to get concerned, my ips has a little diagram from Tyler's portfolio Charts that shows how variable the market can be.  And my ips tells me what to do, which 99% of the time is STAY THE COURSE.

I prefer to stay the course.

Is it a sensible AA in index funds? Or is it invested in bitcoin and ripple and marijuana stocks?

VTSAX 80%
VTIAX 20%

[Jtrey17]

Yes, you’re right! I still don’t quite Max it out-working on it slowly but surely! Since discovering MMM I’ve gone from 6% to 16% in the last few years ❤️.

The other thing we don't know is the timing of the income earned, ect, and how much was contributed when.

At $229,000 over the working career, the poster is not putting in the full $18,500 per year.

[Jtrey17]

I don’t think so, unless high expense ratios is considered stealing.

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

[Steeze]

OOOKay, admission here. We have an EJ account which we have had for years. First, a little back story. I fully fund my 401K and, this year, a separate Roth. The Roth is with EJ, as is is my wife's Roth and traditional IRAs, and the kids educational savings.

Recently EJ implemented "Guided Solutions". It was explained that the company takes a cut off the top (around 1%). The sales pitch for this is it eliminates the commissions for sales and purchases, thereby making more frequent trades financially easier.

We are buy and hold types for the most part, so the frequent trades aspect doesn't impress. Looking at my account activity, they ding monthly now, which is getting irksome. The wife and I are prospecting for another option. TD Ameritrade? E*trade? Any suggestions.

I realize we just got way off topic....

@theolympians , call up vanguard on tuesday, tell them you want to move your EJ accounts over. They will walk you through and do most of the work for you for free. You will need to fill out some online forms that is all. EJ may charge you some fees for leaving. Its worth paying. EJ is a decent service for people that dont know anything about investing, dont want to learn, and need a door to door salesman to get the money in their mattresses to work for them. EJ’s fees are some of the highest in the biz. No respectable mustacian should have an accout there. Get out of there and consider it a learning experience. Vanguard, Fidelity, or Schwab will all take care of you. Vanguard is the standard in the FIRE community and one of the largest brokers for good reason, The late founder John Bogle wanted to protect the little guys from companies like EJ. He built his company on the promise of keeping fees low, creating products that protect wealth for buy and  hold investors, and not offering products or services which have inexcusably high fees or are unnecessary.

[JZinCO]

My rate of return at Vanguard shows -14.2% as of 12/31/2018.  Should I be concerned?

Yes. Sell, sell, sell. Get out while you still can!

Or, as I said before, select an asset allocation that you can be comfortable with (it may mean missing out on the best gains so you don't have to experience the worst drops). This takes some real effort and reading up.
I did when I developed my investor policy statement (ips). Were I to get concerned, my ips has a little diagram from Tyler's portfolio Charts that shows how variable the market can be.  And my ips tells me what to do, which 99% of the time is STAY THE COURSE.

I prefer to stay the course.

Great!
I'm not sure about you but it is often hard to grapple with emotions even when you have that rational Jiminy Cricket right beside you.

To you (or anyone else who frets about returns) it's best to recognize that there's nothing subjective to returns for an index fund. It tracks the index minus fees/expenses. So worrying about 'better' or 'worse' performance becomes a moot issue (maybe not true for active funds) because the investments are tracking the objective standard which sets the bar for better or worse performance. Once having decided on an asset allocation (ideally with annual auto-rebalancing), the only activity for an index investor is managing one's feelings*.
I have a couple personal strategies:
1) Don't look at balances much and don't look at returns at all. I just look at my net balance semiannually-ish ("oh look, it goes up and down but on the whole it tends to go up. neat.").
2) Realize that, because most stock prices are volatile, rates of return are sensitive to arbitrary start and end dates. For example, I just logged into my returns that show returns as of 12/31/18 averaged -11 (global exUs and small caps were the lowest and I have a smallcap/emerging market tilt). I also clicked on a button for YTD that said 7% annualized return. So am I on the right track? Based on what long-term averages of my asset allocation suggest, yup. Based on arbitrary start and end dates? Is that really even relevant when I am continually contributing over time?**
3) Recognize what I can control (asset allocation, contribution rates) and what I cannot (the market).

*Side note: That's where Ramsey's suggestions can really get people into trouble, by setting up erroneous expectations.
** Nope, my actual return is the total return of all shares whose respective purchase prices vary depending on purchase date.

[Mississippi Mudstache]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

I believe you're confusing total returns with annual returns. If you averaged a 73.56% annual return since 2002, you have better things to do than comment on silly blog posts...like buying yachts, or invading minor island nations.

[catorbe]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

I believe you're confusing total returns with annual returns. If you averaged a 73.56% annual return since 2002, you have better things to do than comment on silly blog posts...like buying yachts, or invading minor island nations.

He's turning every dollar in 2002 to over $20,000 today. Meh.

[MustacheAndaHalf]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

[powskier]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

[AdrianC]

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

Which fund are you quoting returns from? Link?
Do you have a lot invested with Renaissance Technologies?

[Mississippi Mudstache]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

So you've been 100% invested in Renaissance Technologies since 1994? Congrats! What the fuck are you doing here?

[appleshampooid]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

So you've been 100% invested in Renaissance Technologies since 1994? Congrats! What the fuck are you doing here?

Their Medallion fund (the one with the stated returns here) is only even available to employees of the fund, with rare exceptions (based on my brief research, never heard of this company until today).

[powskier]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

So you've been 100% invested in Renaissance Technologies since 1994? Congrats! What the fuck are you doing here?

Note I never said I was invested with them, I wish, but it's invite only and I am not in that class at all. Interesting to see your responses though. My point is simply there are many , many different kinds of returns out there. The end.

[MustacheAndaHalf]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

So you've been 100% invested in Renaissance Technologies since 1994? Congrats! What the fuck are you doing here?

Note I never said I was invested with them, I wish, but it's invite only and I am not in that class at all. Interesting to see your responses though. My point is simply there are many , many different kinds of returns out there. The end.

First off, if someone says something unbelievable, it's better to start by not believing them.  The other poster said a +73.56% annual return, which is not believable.

Second, "averaged a 71.8% annual return" still leaves no examples of someone getting a +73.56% annual return.  While in general I don't trust hedge funds self-reported performance, your number not only falls short, it's before fees.  I think you missed this:

"In 1993, Renaissance stopped accepting new money from outsiders. Fees were also ratcheted up — from 5 per cent of assets and 20 per cent of profits, to 5 per cent and 44 per cent."
https://www.afr.com/technology/inside-the-medallion-fund-a-74-billion-moneymaking-machine-like-no-other-20161122-gsuohh

So after your money grows +71.8%, they take 5% of your assets (-9%) and 44% of your profits (-31.6%), leaving you with an amazing +33% return.  But not a 72% return, since they're basically taking half of it.  And that's assuming a hedge fund is accurately reporting their returns.

[Mississippi Mudstache]

Oh man that's crazy low. Over the same period I was averaging 73.56% return. Don't understand how yours can be so low. Are you sure no one is stealing from your account?

Averaging means per year, so you're claiming +73.56% per year, which is pretty much impossible.

I think some folks need to get out more. Renaissance technologies from 1994 through mid-2014  averaged a 71.8% annual return and  in 2008 they returned 98.2%, the same year the S&P lost 38.5%.

So you've been 100% invested in Renaissance Technologies since 1994? Congrats! What the fuck are you doing here?

Note I never said I was invested with them, I wish, but it's invite only and I am not in that class at all. Interesting to see your responses though. My point is simply there are many , many different kinds of returns out there. The end.

Skepticism regarding claims of fantastical investment returns over long periods of time is healthy. People tend to take stupid risks with their money when they start to get the impression that average market returns are somehow insufficient.