Bummed out, should i be?

[dbdog]

18 months ago I transferred our retirement portfolio to a capital management firm. I had managed it up until then. . I had us in about 10 different SEP IRA and SIM IRA and just IRA’s. Everything was either through American Century or American Funds.Nothing fancy, I mostly just added to the funds each year. Started having too much going on at work and dealing with terminally ill parents to properly look after it. So we thought a professional would better grow it even with the advisor fees.
Just had our meeting with FA (CIMA) for 2014 results, he started the conversation with “we underperformed”
Their goals for our portfolio was 7-8%, moderate growth & income. Asset allocation is 16% cash, 16% bonds and 68% growth/income equities.
Total was 3.2% growth for 2014. Given the S%P was 13.7% for 2014 I feel we missed out on a significant opportunity to grow our portfolio.
I’m interested in what some of you think, I checked the performance of the funds we were in prior and for 2014 and the average growth would have been a little over 8%.
I am considering take back managing our portfolio. I’ll be 60 in 2 months.
Thanks
DBdog (our golden retriever)

[Walt34]

Such is the cost of tuition. A Vanguard target date fund would have done better than that and it doesn't get much simpler than those.

[heeyy_joe]

I did 13% with a 20% cash position. Fire that chump.

[MRG]

Were you paying front end loads from American Funds? How did your FA get compensated and do you know what % you paid their service? Don't worry some FAs try to hide this.

Oh welcome to the forum.

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[RockyMtn]

Think that I would flick the guy. 68% stocks should have performed much better. How many points you pay him/her?

[Chuckanut]

3.2%?

You could have put it all in the PenFed 3% certificates and earned almost the same return.

Of course it is a 5 year commitment

[travelover]

Quote:

Originally Posted by Walt34 Such is the cost of tuition. A Vanguard target date fund would have done better than that and it doesn't get much simpler than those.

+1 Just move to a Vanguard target fund

[pb4uski]

Quote:

Originally Posted by dbdog 18 months ago I transferred our retirement portfolio to a capital management firm. I had managed it up until then. . I had us in about 10 different SEP IRA and SIM IRA and just IRA’s. Everything was either through American Century or American Funds.Nothing fancy, I mostly just added to the funds each year. Started having too much going on at work and dealing with terminally ill parents to properly look after it. So we thought a professional would better grow it even with the advisor fees. Just had our meeting with FA (CIMA) for 2014 results, he started the conversation with “we underperformed” Their goals for our portfolio was 7-8%, moderate growth & income. Asset allocation is 16% cash, 16% bonds and 68% growth/income equities. Total was 3.2% growth for 2014......

16% cash @ .9% (Discover Bank online account) + 16% BND @ 5.95% + 68% VTI @ 12.56% = 9.63%

Fire him.

[JPatrick]

I can appreciate the time constraints you are under, but these guys are not getting the job done for you. There is no excuse for a performance like that.
I recommend you get a hold of some of Paul Merrimann's books and use them to set up a simple but effective portfolio on your own using Fido, and/or Vanguard funds. An Amazon search will show about 4 current books. All simple, all straight forward, and all results are documented. Pick two based on what you thinks fits your situation. Probably cost you 20 bucks with shipping.

[Chuckanut]

Quote:

Originally Posted by dbdog Just had our meeting with FA (CIMA) for 2014 results, he started the conversation with “we underperformed” Their goals for our portfolio was 7-8%, moderate growth & income. Asset allocation is 16% cash, 16% bonds and 68% growth/income equities. Total was 3.2% growth for 2014.

I am curious, just what funds/stocks/bonds did he/she put your money into?

Was there much trading going on? I don't know what happened, but if it was my money I would check to see if the account was churned.

[Katiek]

First off, don't get down on yourself. There are times when we all need a break and can't handle another thing, and dealing with terminally ill parents is about as stressful as it comes. Even if the funds underperformed, that may have been exactly what you needed for this year.

But going forward, it certainly sounds like you can take this back and manage it on your own. One thing you'll see here at the forum is that there are a number of ways to invest that can almost be "automatic pilot" and still give you a diversified portfolio. Just saving the fees will already give you a head start.

[Animorph]

I think if you were heavily into international equities you may very well have average performance at 3.2%. Certainly no one can get you 7%-8% in any one specific year. I hope that was a long term average, not a prediction for 2014.


However, it would have been easy enough for you to achieve the same result with simple index funds and a once a year rebalance.

[dbdog]

Yes on the front load American funds. FA fee is a % of portfolio value. 1.25% of the equities portion,

[MRG]

He took you from the start. With the front end load, that's a hard whole to climb back out of. I'm sure he told you it worked on a longer term time. Some American funds do perform ok, but they take you up front and with fairly high fees you're really at a disadvantage. Then if he churned you in and out of F.E. load funds it hurts much more. This guy is treating you so last century. You deserve better.

It's not your fault some of these people think of their commissions ahead of your best interests.

Start your assent now. Transfer to Vanguard, Fidelity, or Schwab. Read some good books, theres a list on the forum, and you'll do much better.

Very sorry about the parent situation, thats a tough time. Easy to believe bad advice. Best wishes.


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[Jmlstocks]

At 60, you would have to assess how much risk you want to be taking. Sure the markets were up 13%, but if you had made 13%, then you were likely taking on far more risk than you would like.
If you were in a truly diversified portfolio, then the internationals would have greatly underperformed, as would the small caps. 16% cash is going to earn virtually nothing, and I think that large of a cash allocation might be a bit extreme, even for a conservative portfolio. More info is needed (such as the specific funds you were in), along with your risk tolerance.

[2B]

Just another version of how wonderful turning your portfolio over to a FA paid by a percent of the assets usually turns out to be.

Welcome to the forum. Your story isn't unique and most of us her have paid our share too.

You got double whacked. You paid the front end load and then had the additional honor of a 1.25% fee. We all looked at one time for that magical key to unlocking wealth from the stock market. Unfortunately, there are many people out there looking to do the same. Your FA is engaged in seeing how quickly he can transfer the assets in your account to his.

Index investing has been shown to be the best hope to grow your money and it takes very little time to do. A few minutes a year is all you need. It helps if you are at Vanguard. Fidelity doesn't have the same broad selection of index funds that Vanguard does. You aren't guaranteed to make money every year but you will get market averages without your FA fee and the loads.

If you are truly lost, post questions here and maybe we can answer your questions. If not a fee based advisor can help you work out a financial plan. Vanguard has CFPs available for reasonable rates and free if you have over $1MM with them. They tend to recommend what amounts to a target date fund but you aren't forced to go with their recommendations.

I like to recommend Andrew Hallam's Millionaire Teacher to people wanting to take control of their own investing.

[Spanky]

"Total was 3.2% growth for 2014"

Is this before FA's fee? Either way the return is low given the equity portion is 68% G&I. As other have suggested, managing it on your own is prudent.

[2B]

Quote:

Originally Posted by Spanky "Total was 3.2% growth for 2014" Is this before FA's fee? Either way the return is low given the equity portion is 68% G&I. As other have suggested, managing it on your own is prudent.

I suspect that the loads were not part of the performance reported.

[SJ1_]

Quote:

Originally Posted by Walt34 Such is the cost of tuition. A Vanguard target date fund would have done better than that and it doesn't get much simpler than those.

+1

That was my first thought- VANGUARD

[Sarah in SC]

My question might be why you have 10 different IRA accounts to begin with?
Can't you consolidate those down to a single rollover IRA and leave the Simple (if you are still contributing) or the SEP (likewise) in one? That makes it pretty portable and a lot easier to make sure you don't have overlap in asset classes between all of them.

Lots of cheaper funds out there to choose from, though some of the American funds are pretty good in the long term.