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How are my Rate of Return in my Roth IRA?
Old 04-28-2021, 10:04 PM   #1
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How are my Rate of Return in my Roth IRA?

I started to invest in Roth IRA in early 2007 with Edward Jones. I know EJ has a bad reputation in the F.I.R.E community because of their loaded funds and some high expense ratios.

I have invested $54k so far till present day and my balance is at $141,192.74. Is this considered as good as if I were to buy low cost index funds? My MF’s are actively managed so fund managers are suppose to beat the average index market.

Should I stay with EJ or go to something like Vanguard?
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Old 04-28-2021, 11:00 PM   #2
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Here's a tool I didn't know existed for S&P returns over time: https://www.officialdata.org/us/stocks/s-p-500/2007
Might be a good comparison.
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Old 04-28-2021, 11:11 PM   #3
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Here's a tool I didn't know existed for S&P returns over time: https://www.officialdata.org/us/stocks/s-p-500/2007
Might be a good comparison.
I can only put in the amount I invested in 2007.
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Old 04-28-2021, 11:17 PM   #4
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$54,000 invested Jan 1,2007 would have grown to $209,578 by today. You can make some comparisons using www.portfoliovisualizer.com . Use the "backtest portfolio" function. So EJ cost you $60,000 if those numbers are right. Suggest you go run them yourself to make sure the input is correct for your situation. "VOO" can be used for the S&P 500 index fund to compare to.
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Old 04-28-2021, 11:19 PM   #5
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$54,000 invested Jan 1,2007 would have grown to $209,578 by today. You can make some comparisons using www.portfoliovisualizer.com . Use the "backtest portfolio" function. So EJ cost you $60,000 if those numbers are right. Suggest you go run them yourself to make sure the input is correct for your situation. "VOO" can be used for the S&P 500 index fund to compare to.
But I did not invest $54k in 2007 and besides there is a cap for us. This year itís $6k.
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Old 04-28-2021, 11:34 PM   #6
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But I did not invest $54k in 2007 and besides there is a cap for us. This year it’s $6k.
Ok, then you may need to put your data into an excel spreadsheet showing how much you invested each year and calculate a total return if you had invested that money in some benchmark (VOO or other) you are comfortable with. Alternatively you can just compare your return each year to the return each year of your benchmark and see if EJ has clearly beaten your benchmark or the other way round. If you don't know how to do this, you may have some number crunching friends that enjoy these calculations. BTW - a good financial investment company will pubish it's results with a comparison to a benchmark. The key is to make sure they are including all costs in their calculation and that they are using a reasonable benchmark.
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Old 04-28-2021, 11:37 PM   #7
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Ok, then you may need to put your data into an excel spreadsheet showing how much you invested each year and calculate a total return if you had invested that money in some benchmark (VOO or other) you are comfortable with. Alternatively you can just compare your return each year to the return each year of your benchmark and see if EJ has clearly beaten your benchmark or the other way round. If you don't know how to do this, you may have some number crunching friends that enjoy these calculations. BTW - a good financial investment company will pubish it's results with a comparison to a benchmark. The key is to make sure they are including all costs in their calculation and that they are using a reasonable benchmark.
How can I do this? Where do I get the built-in excel formulas?
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Old 04-29-2021, 04:43 AM   #8
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The built-in XIRR function is described here:
https://support.microsoft.com/en-us/...b-a303ad9adc9d

On-line calculator here:
https://www.free-online-calculator-u...alculator.html
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Old 04-29-2021, 05:11 AM   #9
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There is also the Dave Ramsey investment calculator. It's fairly simplistic, but easy to use. Put in your starting investment and the average of how much you invested monthly, and then play with the annual return until you get your actual total. Then compare this annual return with the S&P 500 annual return over the same time period.

https://www.ramseysolutions.com/reti...ent-calculator
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Old 04-29-2021, 06:05 AM   #10
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None of this is getting at the risk adjusted returns. If the EJ portfolio is riskier than the market, it might well have beaten it, but you may still not want to own the EJ portfolio in a downturn if it takes a bigger beating.

I think you can get useful information about risk adjusted returns by using Portfolio Visualizer with a hypothetical investment in your fund vs. others and it gives you information about risk like the Sharpe ratio, Sortino ratio, standard deviation and maximum drawdown that will give you a better feel for the risk adjusted return. I would either look up when your fund was founded and go back that far or at least try different dates in Portfolio Visualizer and let it tell you when data became available for your fund.

But even with data, how would you separate luck from skill? Maybe it was a Tech fund and this has been the era of Tech, just like past eras were dominated by coal, railroads, autos or oil. But maybe the next decades will be the era of genomics or space or nuclear or solar or robotics or even crypto and your fund could be left in the dust.

The market is an information processing machine so once something is known, it's in the price before you can blink. Since none of us get to see the future, we are equally clueless about what the market will do next. So two things matter - diversification so you get the market return and the cost to get it. I would get out of EJ and get to a low cost, broadly diversified fund, like a total stock market fund. Vanguard, Fidelity, Schwab all have low cost total market funds available.
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Old 04-29-2021, 08:20 AM   #11
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But I did not invest $54k in 2007 and besides there is a cap for us. This year itís $6k.
What you could do is to do a Portfolio Visualizer Run for each deposit comparing what Fast Eddie has you invested in to some benchmark consistent with the AA that Fast Eddie has you invested in... comparing the performance of each deposit... you could even then add them up if you want to.

I did an exercise similar to this for a friend a few years ago... she had an old 401k that was invested in certain funds... I compared her last 3 year performance with an index fund with a similar AA as her 401k investments... not surprisingly the index portfolio won by a wide margin.
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Old 04-29-2021, 09:49 AM   #12
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I have invested $54k so far till present day and my balance is at $141,192.74. Is this considered as good as if I were to buy low cost index funds?
More info is needed to answer that. How is the EJ account invested? What funds are you in? You need to make sure you're doing an even comparison to see how those funds performed compared with comparable index funds.
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Old 04-29-2021, 09:50 AM   #13
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From 2007 to 2021 is about 14 years. The following article has some data about how many actively managed funds outperformed indexes over a 15 year timeframe. This data is from 2018, so it covers most of the period you're talking about.

(The answer is about 5% or so of funds, so you have about 1 in 20 chance of beating the indexes.)

https://www.aei.org/carpe-diem/more-...ls-cant-do-it/

I am not sure whether this article ignores taxes, risk, effort, and survivorship bias. If so then the real probability is much closer to zero.
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Old 04-29-2021, 09:52 AM   #14
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From 2007 to 2021 is about 14 years. The following article has some data about how many actively managed funds outperformed indexes over a 15 year timeframe. This data is from 2018, so it covers most of the period you're talking about.

(The answer is about 5% or so of funds, so you have about 1 in 20 chance of beating the indexes.)
Exactly. Actively managed funds are supposed to beat the indexes; they do not.
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Old 04-29-2021, 09:58 AM   #15
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The question should not be whether your EJ account beat an index in the past. They might have, especially if they took more risks.

The question is, what are the chances that EJ will be an index in the future, with a similar risk/volatility in investments, especially given their fees? Not likely. But if you want to stay with EJ, that's your business.
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Old 04-29-2021, 12:36 PM   #16
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Exactly. Actively managed funds are supposed to beat the indexes; they do not.
A better way to put it is....In aggregate, actively managed funds lose to the market indexes by their fee's and expenses. Exactly what you would expect. One of the earlier papers on this topic was written by Mike Jensen titled "The performance of Mutual Funds in the period 1945-1964" You can find it in the May 1967 journal of finance.
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Old 04-29-2021, 01:02 PM   #17
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Rather than looking at your past results, look into the future.

https://www.dinkytown.net/java/compa...ment-fees.html

Use 3 different fee structures. Use your actual numbers and contribution rates. Use a reasonable return rate. 4% maybe.

Our all up cost at Vanguard is .06%

Use .10% 1% and 1.5% (or your best guess based on your funds and fees at EJ).

Look out 30 years. Well, you may not want to.

Just 1% is quite awful over 30-40 years.
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Old 04-30-2021, 08:57 AM   #18
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If you know when and how much you put into your account. You can use MRG's tool above.
Say 14 times once per year. Plug each amount and year in. Add up by hand. No spreadsheet needed!
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Old 04-30-2021, 10:55 AM   #19
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If you know when and how much you put into your account. You can use MRG's tool above.
Say 14 times once per year. Plug each amount and year in. Add up by hand. No spreadsheet needed!
I do know the exact amount I contributed each of the years but not the increments for each year.
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Old 04-30-2021, 11:07 AM   #20
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More info is needed to answer that. How is the EJ account invested? What funds are you in? You need to make sure you're doing an even comparison to see how those funds performed compared with comparable index funds.
+1

With qualification. Ed Jones sells 6 fund families*. You can buy the same fund all by yourself and pay the load, looking at you AFS. Of course you save the 1% nonsense, avoid 6% fe loads, keep it for yourself. Now maybe Jones has some insights into how each managed fund will perform in the future. That is their value add.

*My understanding of the fund families choosen is for their ability to calculate and pay Ed Jones their commissions.
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