How are my Rate of Return in my Roth IRA?

[F.I.R.E User]

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?

 

[MRG]

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.

 

[F.I.R.E User]

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.

 

[Whisper66]

$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.

 

[F.I.R.E User]

$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 it’s $6k.

 

[Whisper66]

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.

 

[F.I.R.E User]

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?

 

[target2019]

The built-in XIRR function is described here:
https://support.microsoft.com/en-us/office/xirr-function-de1242ec-6477-445b-b11b-a303ad9adc9d

On-line calculator here:
https://www.free-online-calculator-use.com/xirr-calculator.html

 

[dirtbiker]

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/retirement/investment-calculator

 

[Exchme]

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.

 

[pb4uski]

But I did not invest $54k in 2007 and besides there is a cap for us. This year it’s $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.

 

[disneysteve]

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.

 

[SecondCor521]

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...-time-95-of-finance-professionals-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.

 

[disneysteve]

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.

 

[RunningBum]

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.

 

[tdv2]

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.

 

[bloom2708]

Rather than looking at your past results, look into the future.

https://www.dinkytown.net/java/compare-investment-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.

 

[ducky911]

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!

 

[F.I.R.E User]

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.

 

[MRG]

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. [emoji854]

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

 

[F.I.R.E User]

+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. [emoji854]

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

No one can buy the class A (this is what I have) without a front load fee.

 

[OldShooter]

I do know the exact amount I contributed each of the years but not the increments for each year.

If you post those 14 or 15 numbers here I expect some kind soul will run the XIRR for you. Be sure also to indicate whether you were or are paying any loads. @PB4 is quite good at this stuff, for example.

I will predict, however, that Fast Eddy has not delivered competitive returns That is their history. Even if you have gotten lucky, I suggest you bail out of there just on general principals.

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. ...

Yes. Here: Sharpe on active management: https://web.stanford.edu/~wfsharpe/art/active/active.htm

It's important to understand, too, that "costs" are much bigger than the published expense ratios. I think most experts believe that the biggest, and best hidden, cost is market impact of trading. Every time a fund manager buys or sells a position, the market moves against him as he trades. I have seen estimates of one or two percent for this cost. And the larger the fund, the bigger the trades, the bigger the market impact, and the higher the cost. That is why low turnover is important. Typically only about a third of funds beat their benchmarks in any given year. It is nowhere near half. Read a few SPIVA reports to see: https://www.spglobal.com/spdji/en/spiva/#/

Finally, OP, when you look at a benchmark make sure you are looking at total return -- the difference between the nominal benchmark number at the beginning and end of the year PLUS the dividends and interest paid. The link posted by @MRG gets you total return data but it can be surprisingly hard to find. A lot of what you find is nominal return numbers, which are useless.

 

[ducky911]

I do know the exact amount I contributed each of the years but not the increments for each year.

? just make it 14 seperate investments and add it up

ie 2007 to 2021...6000 dollars = xxxxx
2008 to 2021...6000 dollars =xxxxx
and so on to
2020 to 2021...6000 dollars = xxxxx


......................................total yyyyy

 

[MRG]

No one can buy the class A (this is what I have) without a front load fee.

Class A and C are the same fund, managed by the same people with a different fee structure. They charge 5.75% up front to join the club, offer a lower annual fee. There's a break even if you hold long enough. Jones generally finds a "great opportunity" for their customers before that happens.

https://www.investopedia.com/ask/an...ual-funds-c-shares-different-and-b-shares.asp

Class C shares are a type of*mutual fund*shares. Mutual fund shares are divided up into three classes: Class A shares, Class B shares, and Class C shares. Each class of mutual fund shares is distinguished by their specific load fees and structures

 

[F.I.R.E User]

? just make it 14 seperate investments and add it up

ie 2007 to 2021...6000 dollars = xxxxx
2008 to 2021...6000 dollars =xxxxx
and so on to
2020 to 2021...6000 dollars = xxxxx


......................................total yyyyy

2007 - $1,000.

2008, 2009, 2010, 2011 and 2012 - $5,000 each year.

2013 - $0.

2014 - $500.

2015 - $1,500.

2016 - $2,000.

2017 and 2018 - $5,500 each year.

2019 and 2020 - $6,000 each year.

Thus far, I have contributed $1,000 toward my 2021 contributions.