Confused about performance

[Mama]

I devoured all of your postings about Ameriprise and learned a lot. But everything is new to me, so I still don't fully understand it. Please bear with me, you the savvy ones, one more time.

I have everything imaginable: a variable annuity in an IRA, another annuity in a TSA, and the rest of the IRAs is in 2 REIT and mutual funds-A shares fully loaded (5.75% plus expense). Wrap fee is 1% and financial planner fee $1,000. I understand that I should move away from this to Vanguard or T. Rowe Price. But to what? When I checked the performance it appears that, with exception of two bond funds, the rest did pretty good for average/above average risk: 10% for mutual funds, 15% for the funds in the annuities-3 year average net of expenses. Three of them are top performers. The diversification appears right too.

I compared mine with, for instance, what Suze Orman recommends in her website:SLASX, POAGX, VIPSX, MSILX, TRRHX, and mine performed better.

I know I'm being robbed, but where is it? What am I missing?

[jIMOh]

Can you document the returns:

1) what deposits have you made to all of above accounts
2) what is value of all the above accounts now

Make sure the 10-15% return is what you have received on your money and not an advisor cooking the books.

For example if $1000 grew to $1150 that is a 15% return. But if that $150 profit took 4 years to make, the annual return is less than $150. Check your records.

If you are comfortable with your investments, do not let me, this board, or anyone else (on a radio show or at a social gathering) tell you otherwise.

[Midpack]

Just one person's opinion (although you will find others who feel the same), but I wouldn't use Suze Orman as a benchmark...

[Marquette]

Not sure what you mean by saying it's all new to you... if you mean investing in general, then sit down with the Boglehead's Guide to Investing. It's no-nonsense and easy to digest to at least get your head around things.

Also, odds are pretty good that you didn't pay the front-load on the A shares since you're paying a wrap. And, even if you did, that's a one-time fee and it's gone now. The wrap fee is hurting you in that it's cutting in to your returns year after year but if you're meeting your risk/reward requirements and like having an FA, then don't fire them tomorrow just because.

You say you're doing good. But, I guess the question would be good compared to what. Dig into the fund holdings to see if you can come up with a good index to benchmark against.

[Mama]

Thank you for your reply.

1) what deposits have you made to all of above accounts
2) what is value of all the above accounts now


That's easy: the money was rollover all together at the end of 2003. It was put in Mutual Funds, one annuity in a TSA, and 2 Reits. There were no more contributions since then, just dividends and cap gains re-investments. The total of these accounts had appreciated 57% at the end of 2007; however, today the appreciation is only 41%.

I have another annuity in an active Simple IRA plan, which I stopped contributing until I'm clear about the whole thing (I'll catch up later on in the year)

What makes me upset is that the FP put my Simple IRA money in an annuity, which (now I know) is an aberration. Now, after reading numerous articles and blogs about how AP operates and charges, I'm suspicious about the whole investment strategy and wonder if I could do better some place else...

[Mama]

Thank you, Marquette-I'll check out that book.

Regarding:

You say you're doing good. But, I guess the question would be good compared to what. Dig into the fund holdings to see if you can come up with a good index to benchmark against.

I cannot figure out the annuities. I took the return rate less expenses stated in the prospectus and compared to like-kind traded mutual funds and it appears that the annuity is doing better. I don't know of any other way for comparing these.

Regarding the mutual funds, what I have yielded from 2.38% (bonds) to 12.57% average 3 year returns.

[FinanceDude]

Originally Posted by Mama

That's easy: the money was rollover all together at the end of 2003. It was put in Mutual Funds, one annuity in a TSA, and 2 Reits. There were no more contributions since then, just dividends and cap gains re-investments. The total of these accounts had appreciated 57% at the end of 2007; however, today the appreciation is only 41%.

So, you made 57% in 4 years, or 14% a year? Not bad.........

What makes me upset is that the FP put my Simple IRA money in an annuity, which (now I know)

is an aberration.

Why is it an aberration??

[Marquette]

Isn't rolling an IRA to a SPIA one way to get the money early since it's now been annuitized? And, I would think it might also be helpful for estate purposes, but I'm not at a point of needing one for either of those reasons.

Buying anything and not knowing why is an aberration. So, by extension, if they got you to buy one and didn't explain why and how it fit into the overall plan, then it's a bad thing... but it doesn't necessarily mean it's a bad thing that needs to be corrected.

[FinanceDude]

Originally Posted by Marquette

Buying anything and not knowing why is an aberration. So, by extension, if they got you to buy one and didn't explain why and how it fit into the overall plan, then it's a bad thing... but it doesn't necessarily mean it's a bad thing that needs to be corrected.

I think OP was referring to the fact that is often discussed on here, that annuitities should never be used in qualified accounts, because the tax deferral advantage of the annuity is a moot point.

More likely, the Ameriprise rep has a quota of "lives" he or she must meet, and like most insurance companies, VAs count as "lives".......

After all, the root of Amerprise is IDS, also known as IDS Life Insurance company, so their roots are in life insurance, not investments.......