Hi! I am in my early 20’s and always knew I wanted to invest early, so I did that with a big name investing firm. I invested 50k. I did about 10k into ROTH acct & the rest are in stocks and bonds. I was not expecting huge returns, but thinking it would start to climb. They told me about 5% returns each year. I invested about 3 years ago (50k) and right now the account says it has $51,500. I’ve watched it over the years and the highest it’s ever gotten is 53k and now obviously with the market it went back down. My question is does this seem normal to you? I feel like I should be seeing more returns by now. I think if it took all the money out I would have even less than what I started with because of all the fees. I’m at a loss and feel stuck… please help ;(
Hi @edh10!
It’s impossible to be able to answer that question without knowing the exact day you invested, what you’re invested in etc. But I think more generally it would be great for you to understand how the market works, and best investing practices!
For some context, in the last 3 years the S&P 500 is up about 38%. So if you did nothing but dump your $50K into an S&P 500 index fund, today you would have about $69,000.
If you took a more diversified approach (which I like) and bought a 2060 target date index fund, you’d be up about 19% or $59,500.
So compared to either of those strategies it doesn’t sound like your account is doing so great. So what TO DO? Many studies have shown that the only thing that can be done to increase the likelihood of future investment performance is to minimize fees. I suspect what “big name investing firm” is doing for you, is essentially charging you a high fee to pick and choose investments (that often have high fees themself) in an attempt to beat the market. The numbers I quoted above ARE the market, so they seem to have failed at that task.
I think if you’re still uncertain about how the market works an account with a roboadvisor like betterment.com would be a good option. They ask you some simple questions, then your only task is to dump more money in over the upcoming years and leave it alone. Alternatively, you could transfer your assets to a brokerage like Vanguard, Fidelity or Schwab and dump 100% of your portfolio (Both IRA and brokerage) into a target date index fund. In my experience, the more simple the investment, the more beneficial it is to the individual investor.
Some arguments in favor of your big name investing firm. I don’t know what you discussed with them or how the invested your money. If, for example, you told them to be “very conservative” because you never wanted your money to go down, then $51,500 is probably about right. Your $51,500 represents about 1% of annual growth. Although, I would hope a financial advisor would help educate on why it’s good to be more aggressive when you’re young and stay the course through volatility.
I’m also not sure what other services they are providing if any.
But whenever anyone asks me about a financial advisor, I tell them it’s best to educate yourself first. I don’t know how to pick a good financial advisor without understanding investing yourself. And once you know enough to identify a good one, you likely know enough to do it yourself anyway.
My website, blog, instagram are places to go, and I also have a list of resources that I have used over the years.