How do I know what returns I should expect on my retirement / IRA accounts?

[mysticaltyger]

Originally Posted by InvestorWithQuestions

I keep hearing how 'the stock market' has been up a lot this year - 30% or so for the S&P 500?

Some of my money is with a 'financial advisor' that a friend recommended. When I look at 2 IRAs (a traditional one that was a rollover from company 401k? and a roth IRA) that's with that FA, I took the closing value on 12/31/12 and subtracted it from the amount I see on the investment company website today, then divide by the 12/31/12 amount... that's how you figure year to date performance, right?

1 account grew 10% and the other grew 18%. Should I be disappointed? the 10% one is in a REIT mutual fund. The other is a mix of bond and stock funds. I am 45 years old (don't need the money for a long time so I can take risks?)

Should I be disappointed? Sure the return will vary based on what I am invested in. But for a 45 year old, it'd be skewed more to stocks and they did well? If I was asking this and was 85, I would thing the rate I could expect would be lower cause I'd be less into stocks.

Can I accept a drop rather than growth? yes. How much? I could sit tight with 30 - 40% drop and if I was in the right thing, know that the account will grow before I need it.

Each FA will have their own thinking on how to invest money. But if they put you in even an crappy equity fund, you aren't going to get a good return (can they put you in a 'fund they like' because they will get more commission? Is that allowed these days?). How do you know that you need to change FA?

thoughts?

REIT stands for Real Estate Investment Trust. They have not done that well this year, but their long term returns are good. The average REIT fund is up less than 2% this year...so your REIT fund is doing well when you compare "like with like".

The 18% is also a decent return if you have a mix of stocks and bonds. It depends on what percentage you have in bonds...but just to give you an example. In my workplace retirement plan, I have 10% in a REIT fund, 25% in a bond fund, and the rest in other stock funds, and my returns are 17.51% this year.

It sounds to me like you have a solid asset allocation plan. Don't mess with it. It won't do as well in good years like 2013, but it will hold up MUCH better in bad years (like 2008).

[Stagemomma]

I refuse to look at my statements. I have no idea what the short term fluctuations are. Y'all will probably think I've got my head in the sand, but I was told you put the money in the fund, and it will grow OVER TIME. No predictions.

It's like a scary movie. If I keep my eyes closed, maybe nothing bad will happen!

[michgc]

Originally Posted by InvestorWithQuestions

thanks for the info. She makes her money selling load funds - A and C type. are you doing that account management on your own? I could pick some no load funds myself. are financial advisers worth the money they get paid? We just spoke to several advisors over the last few weeks. It seems nebulous how to choose one. Certainly not quantitatively. He earned x% for people the same age as me. and that other person earned y%? how much risk the different clients were willing to take makes the difference.

Not sure if you were asking me, but I'll answer. I have no financial advisor. My IRA I invest on my own and my 401k is through the workplace where I have limited options. I'm not sure if a financial advisor is worth it. I am leery of some of them. My 85-year old mother-in-law had one who had her invested in very high risk funds that were inappropriate for someone her age. I had her pull the money out and had her invest in Vanguard Wellington which is doing well for a lot less risk. I think most intelligent people can invest on their own in mutual funds with a bit of research.

[AmFest]

7% seems to be the long-term average return. But it's entirely possible to earn more than that. For example, the past couple of years have favored stocks, so you want to have shifted your portfolio to stocks. But the couple of years before that you want to have invested mostly in bonds. And if you have a long time horizon, you want to invest in riskier assets with higher return potential. If you really care about the performance of your portfolio, don't just settle with keeping the same asset allocation from year to year. But in order to do better than others, you need to have a vision, and vision requires knowledge. Do you understand how the economy works? Are you willing to put in the time to research the market? Time and money is a trade-off.