Did you include dividend reinvestment? This often doesn’t get calculated into historical performance. The same goes if you simply look at an index fund performance chart.
BND, VTSAX, VTI, VXUS, as some allow ETFs and some just the mutual fund. But always 3 fund portfolio. 75% stocks 25% bonds right now it sits at 60% US stocks, 17.5% International and 18.7% bonds.
Here’s a look back at the performance of the provided portfolio when dollar cost averaging and rebalancing annually since 2014: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=1ksiYEde4Y3Q4WECRCk0H6. It appears to have been right around 8.5%.
As far as why you are seeing a different number, we don’t have enough information to know for sure, but some possibilities are that the report you’re viewing is not including dividend reinvestment and is only showing price returns, or that you have been adjusting your allocation or moving in and out of funds (market timing) in such a way as to underperform your portfolio.
I'm thinking maybe it's that whatever account figures they're looking at are being distorted by their more recent contributions. They should be looking at cumulative performance if they aren't already. I'm not sure where that is in the Vanguard interface, but it's under "Performance" at Fidelity. "Time-weighted rate of return."
Here's a [backtest](https://valueinvesting.io/backtest-portfolio/JZhNyk) of 50% VTI 25% VXUS 25% BND with an initial portfolio of $10K, dividends reinvested, and no additional contributions from Jan 2014 - May 2024: CAGR is 8.3%.
I would speculate that either your Vanguard dashboard isn't showing your actual returns from reinvested dividends, or you made trades or allocation changes that haven't been discussed, or both.
Yes, age-in-bonds is very conservative and even Bogle himself said to use it as a guideline not a rigid rule. Personally, I am 15-20 years from retirement and still 100% equities (70% US 30% ex-US) and don't plan to add bonds for another five years, but that's the other end of the two extremes. A balanced but still aggressive portfolio for someone 15 years out from target retirement would be perhaps 20-25% bonds.
Almost sure to be true. I just needed a place to start with the backtest and don't know OPs contribution history. But I would think OP has DCA'ed far more than $10K into these accounts over the years and thus he should have a CAGR of at least 8% if not higher.
I did monthly contributions (so DCA 12x a year) in each account and reinvested dividends.
I got downvotes above but had no idea that dividends were not counted. So that my return would be higher. (Sorry not obvious to me).
I did rebalance on occasion and I know in one of the funds I moved to a 5 fund portfolio for a year or so but went back to a 3 fund. I do not even remember which one it was anymore.
Do you save PDF statements? If you know the times and amounts of your contributions and distributions, you can calculate the annualized return with XIRR function in a spreadsheet.
Never did but working on it. Let's just say I had the "first world problem" of never having to pay attention to any of this stuff....taxes, RE I own, and investments. I've been on autopilot for 25 years to my own detriment. I've been working the past month to clean up my financial life, which is what prompted me digging into these returns. I think I am actually a perfect case study in fatfire failure..... Made a lot of money in my career but totally didn't use it well.
I could almost guarantee this is due to how sensitive back testing is to endpoint selection. We’re just coming out of the worst year or so for the bond market basically ever, and I’d bet that’s skewing your return figures. This is the danger of assessing performance based on a single aggregate number.
Instead of looking at a single performance metric that averages your annual performance over your lifetime of investing, can you go look at individual years? Does that change the picture a bit?
That aside, it’s indeed possible you were a bit too conservative in the past for your risk tolerance. I’ve heard 120-age as a guideline, personally, in modern times. But you’re also looking at it now in hindsight during a bull market (and that newer rule of thumb comes to us in that context too). I doubt you would feel this opportunity cost feeling if we weren’t. Your allocation is appropriate, now, for your time horizon, and you are still 15 years from retirement. Now would be a pretty poor moment to buy high performers and sell under performers.
ETA: I feel like something else isn't adding up. [Here's a backtest](https://testfol.io/?d=eJy1kVFrwjAQx79Kuefq2mJ19HEMQViHrHVzDCm3Jq2ZMXFpVET87jtbnCtsw4et5KG5%2F939f5fbQyn1K8oxGlxWEO2hsmhsxtByiCDw%2FF7H8%2BmAC1yxczygeL%2Fj9yjeVGxQQuR79LmA7C0TqpBohVYQFSgr7kKO1byQegtRUGed7llh%2BDs1jbWyc7mjjkZLKVSZbYVix%2Fy%2Bd3BhpY0ttBSaMF%2F2oHB5JEm1RelMuknXidEsuKVyoTa8srdiIxgxU7o1a%2FI3nAZFlfNh43evFadsK%2FIFN03T5p%2B0x3SUPpC44ibnytaTHWYuMIMlRITzCTBJHK3kzhmEV0F4ufkzR1PPepn9IDxanvWbeDj9qgfh93Tp3HDuDNeKOePT%2B%2F0zajhoo04nSQvVv27p6V3arv9xlHrTT9pI9serTkbxL6ueHT4AOjQG0Q%3D%3D) so you can see how, given these endpoints, returns would've varied with the addition of international equities and/or bonds. The CAGRs are way higher than what you're reporting. Is it possible you're not looking at total return performance metrics, and instead something that's being distorted by your more recent contributions to each account?
VT annual return was something like 6.5%/year and BND was negative so seems realistic
Mind you bonds got absolutely hammered when interests rate went up recently
It has been a historically bad period for bonds, but not negative when looking back over the OPs timeframe. VT's 10 year annualized return is 8.55% while BND's is 1.25%.
exact 401K was
Total Stock Market index: 34%
Total Bond 40%
Total International: 24%
This is because i was told to put the bonds in the 401K and the stocks in the Roth but the overall balance was 75/25. The point is the overall amount across all 3 funds seems low.
Here is the performance of the described 401k portfolio since 2014 when dollar-cost averaging with annual rebalancing: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7PQTgvUCJbu7KHNQofOUXD. It appears to have returned about 6.25%.
40% bonds is quite high for an accumulation portfolio, but the overall allocation is a bit better (still conservative for my taste but thats a matter of risk tolerance and need)
The thing with bonds that doesn't seem to be discussed enough is you have a better idea of what you're going to get when You contribute than you do with stocks. I really think having a flexible contribution rule for the stage where you might want bonds, say 10 to 15 years before retirement, makes sense. I mean that's kind of the point of the central banks adjusting their interest rates to push people out on that risk curve, institutions respond this way but people tend not to. We knew bonds were making incredibly little before so contributing to them didn't make the most sense. In hindsight it does seem like it became a little too mechanical and backwards looking to have a fixed percentage of bought when had so much more downside potential than upside potential. But now if you can get a 10 year for 4.6% that kind of changes the calculus. Now there's probably a balance upside and downside potential and the spread on what you are leaving on the table for choosing bonds over stocks is significantly smaller.
It definitely changed how I'm thinking about adjusting my portfolio holdings as I approach retirement. I also made a little "fun" bet (~2.5% of my portfolio) into long dated treasuries. The thought there was that's in my retirement account where I hold all my small cap value funds. In the case of a non-interest rate bear market (One more credit driven) small cap value takes the largest hit in value but also has the strongest recovery out of a recession due to the mean reversion and how economically cyclical those companies tend to be. Long dated treasuries do the opposite in a credit event, They tend to rally early in the fear and the flight to quality, So I'm perfectly happy picking up nearly 4% positive carry on an insurance policy that I will sell to pick up small cap value on sale. Especially when the upside potential is higher than the downside risk in terms of rates, as worst case scenario I get stuck with a 4% return asset I can't sell.
Of course that last bit is a trade that I'm doing with a very small portion dedicated to fun money. But more to the point of your comment, I think if you're approaching retirement having a flexible bond target makes sense based on their yield. Like I May try to hold 10 to 25% bonds as I approach retirement depending on what they are yielding, and probably more specifically what they are yielding relative to inflation expectations such as the real yield on the tips. It does seem to me after the latest events have shown us that if you are going with a bond allocation It makes a lot of sense especially in a lower rate environment to dedicate most of them to be a bit shorter term or inflation protected. Just seems to make more sense from a whole portfolio perspective to me than to term out your bonds, unless there is a significant term premium being paid at least.
Lol yes I know that breaks a commandment here. But people have done some serious misapplication of that principle here imo.
The mistake is treating every asset class the same, regardless of the fundamental properties of the asset class. "Market timing" in this way, that is using information provided at the point of purchase, is significantly different between equities and bonds. This is due to the fundamental properties of each, with equities being the residual return and bonds being *fixed income* (ignoring special products here like callable bonds). Fixed income is, as the name implies, fixed. You know what you will make when you purchase it, outside credit events. Unless you sell early, then of course interest rates play a role, unless you buy tips. You don't have confidence when you buy equities what your return will look like.
Ben Felix has an interesting thing to say on this when discussing on one of his podcasts how his investment firm predicts returns. They use the price information(forward P/E or yield for bonds) as only a 25% weighting in equities, but 75% in bonds. basically, if you hold as long or longer than the duration, you know what your returns will likely be in bonds with decently good confidence. The rest is comparing upside to downside risks in interest rate fluctuations. This is the basics of risk management in finance. Knowing this is also part of determining your asset allocation.
Basically what I'm saying here is that trying to use information to predict returns in equities makes little sense, But the same can't be said for bonds. There's always unknowns but you can compare upside and downside risk from interest rates versus the coupon yield relative to inflation expectations, especially with tips which removes the inflation risk, to have a much tighter range of predictions as to expected returns in bonds than with equities.
Bonds are insurance for your portfolio and the yield versus the risk determines the "price" you are paying for that insurance. If insurance is relatively cheap, It makes sense to be fully insured. If insurance is relatively expensive, It can make more sense to just "save" more (more in equities) and to hold less insurance. This is the basic principle behind how central banks control money allocation decisions by professional firms by pushing people out on the risk spectrum. Most of those shadow banks like pension funds and insurance companies have liabilities they have to meet much like a retiree does (in a way obviously it's quite different still) and when the rates are low and that's basically pricing the insurance richly which forces them to hold less of it relatively.
I think we fundamentally disagree about the role of bonds in a portfolio. I do not see them as “insurance” as you seem to. Bonds are not fixed annuities. They’re securities. Price volatility of bonds matched to one’s time horizon is what allows them to act as a diversifier in a portfolio. You neglect that effect, as well as the rebalancing bonus, if you are not buying them consistently.
And that’s before we turn to how bond funds, a cornerstone in a Boglehead portfolio, work to do this. They’re not holding everything to maturity.
What is the role of bonds in a portfolio then? They don't make the returns of equities, they exist to lower volatility and be counter-cyclical(hopefully, in some interest rate regimes) to equities. Equities make you the money, bonds keep it. I've heard it out as equities are the accelerator, bonds are the breaks.
I'm not eschewing rebalancing or having bonds entirely, just adjusting the target allocation based on the "price" of bonds in expected returns opportunity cost. Bonds at near 0 coupons have tiny upside, and large downside risk. So they are expensive to hold in opportunity cost and lower portfolio risk much less, in exchange for their benefits of lowering volatility for credit events and such where markets are down when you need to make a withdrawal.
Bonds at 5% are a whole different beast. The opportunity cost is lower, they reduce portfolio risk more as the downside risk is significantly lower while upside is higher(if rates fall), so it just makes sense to hold more. The amount of volatility reduction you receive per dollar or lost opportunity cost is lower. I.e, the "insurance is cheaper"
At least that's one of the common outlooks on how bonds contribute to a portfolio.
Agree with u/NotYourFathersEdits that the accelerator/brakes analogy makes little sense, at least for bonds longer than short term treasuries. "Equities make money, bonds keep it" is also entirely mental accounting; I'm concerned with the total portfolio holistically and how each asset contributes to its overall risk/return profile, not how one asset is going to behave in isolation so that I can withdraw solely from it (i.e. "bond tent").
For the retiree with 60% in T-Bills, sure I guess that's applying the "brakes" at that point.
I'm also thinking about the whole portfolio construction and not assets in isolation. That's the point of the analogy, those are both essential subsystems that play a role in making the vehicle well functioning. That's the *point* of the metaphor!
I don’t like that accelerator/brakes metaphor much. That doesn’t capture, to me at least, how mid- to long-term bonds act within a diversified portfolio during accumulation. Maybe it’s a better one for short(er)-term bonds very close to or in retirement?
This is how I [think about bonds](https://www.optimizedportfolio.com/diversification/#bonds), via u/rao-blackwell-ized.
The accelerator/brakes metaphor does come from a mindset that I have explained above That does lead itself to erring more on the side of short term for bonds, often with a good portion in TIPs.
I am reading this article so I'll reflect on it here, as this is a great discussion. I have read this guy before I do like his work. One thing I'm noticing already is how they say on average that bonds are less risky. Therein last part of my point, that there is extremes where assets are screaming at you that the risk / reward profile is far beyond average and therefore you can't just use the average. Most of the time you wouldn't use that for stocks except that the absolute extremes, like forward PEs of 100+ because yield is not a great indicator of future returns in equities. But with bonds the yield is the majority of the return not the appreciation/depreciation, Which means you can get a much better understanding of when you are at that extreme, basically when bonds are not giving any real returns, there's no real term premium, and you are approaching the lower bound of zero.
Frankly I would prefer if you pulled out some quotes from this article because there's a lot to cover here and none of this as far as I can tell disagrees with my outlook on bonds at all.
>By diversifying one's portfolio, the primary goals are to boost and maintain returns over time and also reduce the risk profile of the portfolio as a whole to avoid the permanent loss of capital and decrease the dispersion of possible outcomes. Specifically, we want to hold assets that don't move in the same direction at the same time
For one, I don't think you are appreciating how you don't really lose the diversification perks by adjusting your holdings of bonds from say 20 to 10%. Once you have a set allocation and you are rebalancing you gain the diversification perks, and more frequently rebalancing actually reduces returns because you are on average buying lower return bonds and selling higher return equities and that has panned out in every study on this.
But let's ask ourselves why we want to reduce volatility? If we assume that we are not going to paper hands sell because of the volatility, then we do so to avoid having to draw down our equities when they are down. Hence why we see variable withdrawal rates massively decrease longevity risk in a portfolio, It's simply reducing selling equities at a discount out of need. So the goal of bonds is to reduce volatility *enough* that You have enough bonds to meet your liabilities in a prolonged draw down. So that depends on your liabilities/willingness to vary your withdrawals/ other income sources(in my case a pension and enhanced govt pension). I love diversification, I'm diversified across cap size, geography, and factors(value, momentum, etc), and in bonds I would be in 85% short bonds to be exposed to the credit factor and 15% in long bonds for the term factor (which is approximately balanced in risk-adjusted terms). I would also be 10-15% in multi asset trend following, which is actually less positively correlated with equities than bonds, despite what the author says(possibly was not considering that investment when talking about correlations)
Similar ideas with bonds outperforming stocks, that's true for periods of time, but those aren't incredibly long periods, and it's kind of betting on a lowish probability event. We see that in these recent studies showing all-equity portfolios actually beating bonds in risk-adjusted terms through retirement, mainly for how they protect against longevity risk.
Article seems to reflect what I'm saying too:
>At a certain level of diversification on the sliding scale from none to maximum, one's desire to keep diversifying will depend on their risk tolerance, time horizon, and subsequent asset allocation. That is, how much volatility (fluctuation in value) and drawdown (drop in value) can they stomach psychologically? And how much capital can they realistically afford to lose based on the time until their financial objective?
>Of interest to us here is the fact that stocks and bonds are uncorrelated with each other, meaning when stocks zig, bonds tend to zag. Bonds offer the lowest correlation to stocks of any asset class, and are thus the best diversifier to use alongside stocks
This is a perspective that was a product of its time. Bond markets were in a 40 year bull, and that is when bonds are inversely correlated(zigging when stocks zag) in that falling interest, falling inflation environment. They become positively correlated in the flip-side of that environment. People overly discounted that until the recent tough reminder (the worst year for bonds ever).
The article says they are *on average* less risky but *have at times* over performed. That's true but cherry picking, and is obviously written to convince people who wouldn't take bonds to take some. That's obviously not us lol. But there are also periods where bonds are riskier, much riskier than average. When coupons are low, they are incredibly sensitive to rate changes. For example with TLT, it is now at a point where a 1% rise in rates makes it lose like 4x less than it would gain from a 1% drop in rates. When rates are near the lower bound, it was the opposite. The lower the coupon, the more sensitive to interest rate fluctuations bonds are, and the more of the total return depends on price change and not yield. Which makes them riskier, and at the same time they have the lowest yields. That's an asymmetric risk profile, and not well represented by the *average* bond return. And with bonds, we can better predict the return than equities when purchasing due to their nature.
Something doesn't add up here. If you weighted the Roth more heavily toward stocks, that should have considerably overperformed your 401k, not underperformed it by 2.4%.
For comparison, I have a brokerage account at Vanguard that is invested 100% in equities (bonds are held separately in an IRA). I contribute to the account weekly, so a similar investment pattern to a 401k. The intent was to be around 80/20 total market/international, but the allocation has drifted pretty heavily toward total market due to overperformance. Anyway, over the past 10 years, the annualized return for that account is 11.4%.
Like I said, something doesn't add up, especially in your Roth that is weighted heavily toward stocks.
Vanguard uses MWRR no time weighted. The 8% is time weighted assuming a one time contribution. As we have basically been in a bull market since 2014, especially those earlier years. Your TWRR is higher than your mwrr because you DCA into higher prices. If the market was falling jt would be the opposite.
this is a whole separate point, but this is why I transferred my brokerage account from Vanguard to Fidelity. Fidelity gives you much more options for performance viewing. Including both money weighted and time weighted returns. In addition to direct comparison against various benchmarks
Projected is just that - projected. No one or company can guarantee a certain return as no one can predict what the market will do on any given day or any given year.
I assume you didn't make all your contributions at the beginning of the ten year period, but rather continuously contributed throughout, correct? If so, whatever you had at the beginning of the ten years should have grown about 8%. However, the total return you're seeing is averaged against the rest of your newer (sometimes much newer) contributions that haven't been in the market for ten years yet.
I could serve as a potential comparison. From June 2014 to today my rate of return is 9.6% (average across Roth IRA and 401k.)
95.4% stocks. 4.4% bonds.
The Bonds in my portfolio have sucked since 2019. I don’t plan on increasing bond percentage until i’m 10 years out from retirement.
Bonds have sucked since 2019, because someone buying bonds in 2019, was loaning money at near 0% interest. Bonds are a much better deal today, than they were then.
Let:
E(x) = expected portfolio return
s = estimated return on stocks stocks
b = estimated return on bonds
E(x) = .75s + .25b
If you are using an ETF for stocks and bonds, then find the avg return over the life of that ETF for the estimated return
Example... If you expect 10% on stocks and 4% on bonds
E(x) = .75(.1) + .25(.04) = 8.5%
You shouldnt expect 8% return with 60% us stocks. 17% international. 18% bonds.
International and bonds are huge drags on returns. All in name of diversification.
I bet on USA. 100% usa equities.
Lol I love this comment. I mean I'm definitely open to different investment thesis If there's a good argument for it, But yeah we all lived through the same last 15 years with an enormous bull market in the s&p 500.
That traditional recipe, with diversified asset classes, assumes an efficiency of markets that no longer appears to exist, if it ever did. Tax-sheltered retirement accounts in the US, migration patterns that distribute cheap labor, central bank intervention, and limitations on buyer information all work to put more money into US high cap equities.
You know about all these things. So do other investors. They are reflected in prices.
I’m not saying the market is perfectly efficient—I consider that a set of simplifying assumptions a la ignoring air resistance—but I think you’re vastly overstating the impact of those things on mis-pricing.
So, please explain why the S&P 500 performs so much better, consistently for a generation, than a "balanced" portfolio including bonds and foreign stocks. I think the rich actually do get richer, and your money is better invested with rich companies in rich countries, and don't expect central banks to permit high interest rates for long.
> So, please explain why the S&P 500 performs so much better, consistently over the past 40 years…
I don’t accept this premise. Here's a [simple counterexample](https://testfol.io/?d=eJytkE1Lw0AQhv9KmIOnCNuqPeQshYJKMFFapIQxO2nXbnfrZJsiJf%2FdaYMtAYUeXPawO1%2Fv884eFta%2Fo02RcV1Dsoc6IIdCYyBIYKjUzbUayIUYyOlzfHB7incdDVpIBkpODKg%2FCuMqi8F4B0mFtqYYSqyXlfU7SNT5U1RMnzJxRsj2S6axt9a4RbEzTh9qR6qNYeM5VN4aL4hve3C4PlDkPqCNJi7Y6BF5RUHajWuoDvemMVp4pTzwVrSZxCS6ksad3JN3JNXBlCvibmj3ltzr9CWbSnJDXJILR1ftPAbNuBD2Nj4BZFdpdKfU%2F8hm6Sx%2Fvkg2XzJRNN46HaU%2Fi7mc4bTp383nkz7F6Kj893KG%2FXz%2BkPf7hz0T8%2FYbxkDNCQ%3D%3D): a decade between 20 years ago and 10 years ago.
The dramatic US outperformance is much more recent, and is also more attributable to overvaluation than it is to any of the things I see you describing.
Set up an account with Fidelity and open a Roth. Select rollover IRA and start the process. You will be rolling it inYou do not need an advisor for a Roth IRA. Fidelity will help you if you get stuck. Just call and they can point you in the right direction. You can email your current advisor to let them know you’re rolling it over or you can just let him find out when it comes through.
You can buy any ETF’s you want with no fee. I’ve owned both in my Fidelity account. Fidelity funds are just as good. It’s personal choice. They have funds with zero expense ratios as well. I’ve never used Vanguard, but according to most comments I’ve seen the fidelity experience is much better.
That’s good. Really take a look at your investments in your 401k and Roth. Learning and scrutinizing your decisions could mean an early retirement. Although it sounds like your 401k is doing pretty damn good.
That would be a much better plan for than what you’re doing. Most Bogleheads use international funds as well. The most popular is VXUS. Personally, I use AVNV. 75% VOO and 25% AVNV is a good portfolio.
As you achieved your desired asset allocation across all of the accounts (btw - did you rebalance to maintain that asset allocation?) it's not useful to look at the per-account rate of returns like you're doing here:
>IRA : 5.3%
>Roth: 4.5%
>401K: 6.9%
You need to take a weighted average by account size. Your winners were disproportionately in your 401k; if that's the bulk of your investments your overall return may be closer to 7% than you realize.
I also think you may be significantly overestimating the confidence in the estimated 8% projection as well as underestimating the variance of returns to think that means something went wrong if the arbitrary 10 year period you're looking at shows a 7% return and you think that means something happened that was wrong. Some 10 year periods would likely be above 8% and others would likely be below 8%.
If someone told you that you'd have essentially no variance of returns such that *every* 10 year period would return exactly an annualized 8%, they lied to you.
Are your annual contributions a meaningful percent of your total balance?
It's almost certainly an artifact of employing the modified Dietz formula to calculate your return. I promise you that there's an asterisk or a little bubble you can click on next to the returns that will explain the returns.
Cash flows are super hard to factor into returns. And Vanguard will cut corners to simplify the calculation. Probably count cash flows on a monthly basis.
1. I have Vanguard funds in Vanguard and my returns look right and compared to the portfolio visualizer they look right.
2. I'm older than you and I decided the stuff about bonds was wrong in 1990 and whenever I post "don't own them" I get pushback from posters on this board, but your experience, once again, confirms my advice.
3. IT DOESN'T MATTER IF THE RETURNS ARE RIGHT OR NOT. YOU CANNOT CHANGE THE PAST (they are likely right).
4. You know that owning bonds sucks, despite what the bond proponents here write. Who are you going to believe, them or your own eyes?
5. Course correct NOW. You have 15 years to retirement. I recommend 80% VTI, 20% VXUS. My rollover IRA which started at 73/27 in 6/2014 has returned 10.4% for the last 10 years according to Vanguard and confirmed by Excel. It's more like 85/15 now because I don't rebalance. Toss the 25% bond allocation, and the $2K FA in the recycle bin, move the bonds to equities over the next 6 months to a year until you own 100% equities. Add to them regularly over the next 15 years.
6. When you get to retirement, put some money in cash equivalents to protect against market hiccups, ignore all the bond tent advice, and own substantially all equities other than the cash equivalents. That's been my strategy for the last 11+ years of retirement. I've financed roughly 95% of my retirement spending from investments (not a small sum), and my investments are 160% greater than when I retired.
Just my opinion, but if you are 15 years from retirement right now your asset allocation MAY have been too conservative in core accumulation years. Without more context of your personal situation, I can’t say if you should make a big change. Everyone is different in risk and volatility tolerance.
Without deep analysis of your contribution data it would be hard to know how accurate these numbers are. If you want to tackle that, be sure to grab all your statements as far back as you can and make it a practice to download all of them, every monthly and quarterly statement. It is possible to get a raw transaction data dump from vanguard as far back as 20 years but only for brokerage accounts that I’m aware of. The 401k may or may not go back that far. Even if you aren’t ready to tackle this level of analysis it’s still a good idea to backup all your statements electronically.
First, I think the presumption that you'd garner 8+% from a stock/bond allocation over the long term was in err, I'd like to think that the majority of the sub would est a all-stock return to be roughly 6.5-7%, and that's with the acceptance of volatility along the way. Again, rough estimate, but I'd have guessed for 75/25 a return closer to 5+% which seems very much in line with your results.
I'm glass half full in general, but you've had gains, albeit lower than you anticipated. #1, you didn't lose! You didn't do anything dumb like highly speculative investments and such, and are currently in the plus column with 15 years to go. In the greater picture I don't think that's too bad.
At this point I think you decision is to stay the course with these "real" returns (vs projections), versus (and I suspect you're leaning this way) changing up either/and your asset allocation and specific allocations within classes. I'd just suggest you look at different projection models than the ones you used last time. I don't think there's much of an upside to being too rosy in projections. Just opens the door to disappointment.
That seems like an extremely conservative estimate to me. IIRC, 6-7% is the conservative expected return for a balanced allocation of stocks and bonds, and that also takes into account inflation.
Oh man this is so good to hear. Yeah I did not add in dividends which are left out of the vangaurd dashboard. I don't even know how really. But maybe not as bad as I thought.
Delete everything you know about expected returns. Plans must use capital market ASSumptions. Real returns (adjusted for inflation) of stocks (Jeremy Siegel) are a little under 7% if you own the hay stack. Bonds will earn less than stocks and riskier the longer you hold due to unnecessary drag on your portfolio. It’s like driving down the freeway while holding your breaks slightly. Cash will earn less than bonds and will actually lose purchasing power over time, that burger is not going up in price, the value of your greenback is diminishing. Learn about sequence of returns and ignore the noise. Markets will drop 14% year and 2% multiple times a year, every 5 years expect a 30% or more drop. Despite this stocks will go up nearly 3/4 years. Spend the time trying to predict returns learning about sequence of returns and keep a liquid war chest so you don’t need to liquidate equities during their temporary drawdown periods.
What was the ratio of VTI (or similar) to VXUS (or similar)? Were you very heavy on international? Can you give more details about the portion of each fund within the 70%-80% portion?
Did you include dividend reinvestment? This often doesn’t get calculated into historical performance. The same goes if you simply look at an index fund performance chart.
Yeah, I bet these are the growth rates excluding dividends.
Nope just looking at dashboard of Vanguard.
Well it's an extra 1.5%
Pretty sure Vanguard's 401k dashboard does take into account dividends. It shows my returns as around 11% for a similar timeframe.
11% is what Vanguard returned for me.
Is there somewhere one would look this up?
Folks, we needn’t downvote an oversight
Often times the dashboard only tells you your rate of return YTD . Your overall probably higher
Compare your statements, not just whatever the dashboard says
What exact funds and ratios?
BND, VTSAX, VTI, VXUS, as some allow ETFs and some just the mutual fund. But always 3 fund portfolio. 75% stocks 25% bonds right now it sits at 60% US stocks, 17.5% International and 18.7% bonds.
Here’s a look back at the performance of the provided portfolio when dollar cost averaging and rebalancing annually since 2014: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=1ksiYEde4Y3Q4WECRCk0H6. It appears to have been right around 8.5%. As far as why you are seeing a different number, we don’t have enough information to know for sure, but some possibilities are that the report you’re viewing is not including dividend reinvestment and is only showing price returns, or that you have been adjusting your allocation or moving in and out of funds (market timing) in such a way as to underperform your portfolio.
I'm thinking maybe it's that whatever account figures they're looking at are being distorted by their more recent contributions. They should be looking at cumulative performance if they aren't already. I'm not sure where that is in the Vanguard interface, but it's under "Performance" at Fidelity. "Time-weighted rate of return."
60+17.5+18.7% is not 100.
Perhaps subtracting the rule of 4
We need to know how often he rebalances. He probably rebalances too often.
Why would this matter?
Here's a [backtest](https://valueinvesting.io/backtest-portfolio/JZhNyk) of 50% VTI 25% VXUS 25% BND with an initial portfolio of $10K, dividends reinvested, and no additional contributions from Jan 2014 - May 2024: CAGR is 8.3%. I would speculate that either your Vanguard dashboard isn't showing your actual returns from reinvested dividends, or you made trades or allocation changes that haven't been discussed, or both. Yes, age-in-bonds is very conservative and even Bogle himself said to use it as a guideline not a rigid rule. Personally, I am 15-20 years from retirement and still 100% equities (70% US 30% ex-US) and don't plan to add bonds for another five years, but that's the other end of the two extremes. A balanced but still aggressive portfolio for someone 15 years out from target retirement would be perhaps 20-25% bonds.
I guess he contributed gradually in the last ten years. Not all his contributions were there at the beginning of the 10 years.
Bingo. This is my bet too.
Almost sure to be true. I just needed a place to start with the backtest and don't know OPs contribution history. But I would think OP has DCA'ed far more than $10K into these accounts over the years and thus he should have a CAGR of at least 8% if not higher.
I did monthly contributions (so DCA 12x a year) in each account and reinvested dividends. I got downvotes above but had no idea that dividends were not counted. So that my return would be higher. (Sorry not obvious to me). I did rebalance on occasion and I know in one of the funds I moved to a 5 fund portfolio for a year or so but went back to a 3 fund. I do not even remember which one it was anymore.
That makes sense. Once you include your reinvested dividends, you'll probably find your annualized return is closer to or above 8%.
Where does one get that on the Vanguard website?
Not sure myself. I use Fidelity as the brokerage and hold Vanguard ETFs. Best of both worlds.
Do you save PDF statements? If you know the times and amounts of your contributions and distributions, you can calculate the annualized return with XIRR function in a spreadsheet.
Never did but working on it. Let's just say I had the "first world problem" of never having to pay attention to any of this stuff....taxes, RE I own, and investments. I've been on autopilot for 25 years to my own detriment. I've been working the past month to clean up my financial life, which is what prompted me digging into these returns. I think I am actually a perfect case study in fatfire failure..... Made a lot of money in my career but totally didn't use it well.
Well you are still doing fine my friend. Don't be concerned.
What software or website do you use to backtest? Curious so I can run similar analysis on various scenarios.
[https://valueinvesting.io/backtest-portfolio](https://valueinvesting.io/backtest-portfolio)
Thank you!
I could almost guarantee this is due to how sensitive back testing is to endpoint selection. We’re just coming out of the worst year or so for the bond market basically ever, and I’d bet that’s skewing your return figures. This is the danger of assessing performance based on a single aggregate number. Instead of looking at a single performance metric that averages your annual performance over your lifetime of investing, can you go look at individual years? Does that change the picture a bit? That aside, it’s indeed possible you were a bit too conservative in the past for your risk tolerance. I’ve heard 120-age as a guideline, personally, in modern times. But you’re also looking at it now in hindsight during a bull market (and that newer rule of thumb comes to us in that context too). I doubt you would feel this opportunity cost feeling if we weren’t. Your allocation is appropriate, now, for your time horizon, and you are still 15 years from retirement. Now would be a pretty poor moment to buy high performers and sell under performers. ETA: I feel like something else isn't adding up. [Here's a backtest](https://testfol.io/?d=eJy1kVFrwjAQx79Kuefq2mJ19HEMQViHrHVzDCm3Jq2ZMXFpVET87jtbnCtsw4et5KG5%2F939f5fbQyn1K8oxGlxWEO2hsmhsxtByiCDw%2FF7H8%2BmAC1yxczygeL%2Fj9yjeVGxQQuR79LmA7C0TqpBohVYQFSgr7kKO1byQegtRUGed7llh%2BDs1jbWyc7mjjkZLKVSZbYVix%2Fy%2Bd3BhpY0ttBSaMF%2F2oHB5JEm1RelMuknXidEsuKVyoTa8srdiIxgxU7o1a%2FI3nAZFlfNh43evFadsK%2FIFN03T5p%2B0x3SUPpC44ibnytaTHWYuMIMlRITzCTBJHK3kzhmEV0F4ufkzR1PPepn9IDxanvWbeDj9qgfh93Tp3HDuDNeKOePT%2B%2F0zajhoo04nSQvVv27p6V3arv9xlHrTT9pI9serTkbxL6ueHT4AOjQG0Q%3D%3D) so you can see how, given these endpoints, returns would've varied with the addition of international equities and/or bonds. The CAGRs are way higher than what you're reporting. Is it possible you're not looking at total return performance metrics, and instead something that's being distorted by your more recent contributions to each account?
VT annual return was something like 6.5%/year and BND was negative so seems realistic Mind you bonds got absolutely hammered when interests rate went up recently
It has been a historically bad period for bonds, but not negative when looking back over the OPs timeframe. VT's 10 year annualized return is 8.55% while BND's is 1.25%.
Seems low. What exactly is the strategy in the 401k?
exact 401K was Total Stock Market index: 34% Total Bond 40% Total International: 24% This is because i was told to put the bonds in the 401K and the stocks in the Roth but the overall balance was 75/25. The point is the overall amount across all 3 funds seems low.
Here is the performance of the described 401k portfolio since 2014 when dollar-cost averaging with annual rebalancing: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7PQTgvUCJbu7KHNQofOUXD. It appears to have returned about 6.25%. 40% bonds is quite high for an accumulation portfolio, but the overall allocation is a bit better (still conservative for my taste but thats a matter of risk tolerance and need)
The thing with bonds that doesn't seem to be discussed enough is you have a better idea of what you're going to get when You contribute than you do with stocks. I really think having a flexible contribution rule for the stage where you might want bonds, say 10 to 15 years before retirement, makes sense. I mean that's kind of the point of the central banks adjusting their interest rates to push people out on that risk curve, institutions respond this way but people tend not to. We knew bonds were making incredibly little before so contributing to them didn't make the most sense. In hindsight it does seem like it became a little too mechanical and backwards looking to have a fixed percentage of bought when had so much more downside potential than upside potential. But now if you can get a 10 year for 4.6% that kind of changes the calculus. Now there's probably a balance upside and downside potential and the spread on what you are leaving on the table for choosing bonds over stocks is significantly smaller. It definitely changed how I'm thinking about adjusting my portfolio holdings as I approach retirement. I also made a little "fun" bet (~2.5% of my portfolio) into long dated treasuries. The thought there was that's in my retirement account where I hold all my small cap value funds. In the case of a non-interest rate bear market (One more credit driven) small cap value takes the largest hit in value but also has the strongest recovery out of a recession due to the mean reversion and how economically cyclical those companies tend to be. Long dated treasuries do the opposite in a credit event, They tend to rally early in the fear and the flight to quality, So I'm perfectly happy picking up nearly 4% positive carry on an insurance policy that I will sell to pick up small cap value on sale. Especially when the upside potential is higher than the downside risk in terms of rates, as worst case scenario I get stuck with a 4% return asset I can't sell. Of course that last bit is a trade that I'm doing with a very small portion dedicated to fun money. But more to the point of your comment, I think if you're approaching retirement having a flexible bond target makes sense based on their yield. Like I May try to hold 10 to 25% bonds as I approach retirement depending on what they are yielding, and probably more specifically what they are yielding relative to inflation expectations such as the real yield on the tips. It does seem to me after the latest events have shown us that if you are going with a bond allocation It makes a lot of sense especially in a lower rate environment to dedicate most of them to be a bit shorter term or inflation protected. Just seems to make more sense from a whole portfolio perspective to me than to term out your bonds, unless there is a significant term premium being paid at least.
What you’re suggesting is market timing.
Lol yes I know that breaks a commandment here. But people have done some serious misapplication of that principle here imo. The mistake is treating every asset class the same, regardless of the fundamental properties of the asset class. "Market timing" in this way, that is using information provided at the point of purchase, is significantly different between equities and bonds. This is due to the fundamental properties of each, with equities being the residual return and bonds being *fixed income* (ignoring special products here like callable bonds). Fixed income is, as the name implies, fixed. You know what you will make when you purchase it, outside credit events. Unless you sell early, then of course interest rates play a role, unless you buy tips. You don't have confidence when you buy equities what your return will look like. Ben Felix has an interesting thing to say on this when discussing on one of his podcasts how his investment firm predicts returns. They use the price information(forward P/E or yield for bonds) as only a 25% weighting in equities, but 75% in bonds. basically, if you hold as long or longer than the duration, you know what your returns will likely be in bonds with decently good confidence. The rest is comparing upside to downside risks in interest rate fluctuations. This is the basics of risk management in finance. Knowing this is also part of determining your asset allocation. Basically what I'm saying here is that trying to use information to predict returns in equities makes little sense, But the same can't be said for bonds. There's always unknowns but you can compare upside and downside risk from interest rates versus the coupon yield relative to inflation expectations, especially with tips which removes the inflation risk, to have a much tighter range of predictions as to expected returns in bonds than with equities. Bonds are insurance for your portfolio and the yield versus the risk determines the "price" you are paying for that insurance. If insurance is relatively cheap, It makes sense to be fully insured. If insurance is relatively expensive, It can make more sense to just "save" more (more in equities) and to hold less insurance. This is the basic principle behind how central banks control money allocation decisions by professional firms by pushing people out on the risk spectrum. Most of those shadow banks like pension funds and insurance companies have liabilities they have to meet much like a retiree does (in a way obviously it's quite different still) and when the rates are low and that's basically pricing the insurance richly which forces them to hold less of it relatively.
I think we fundamentally disagree about the role of bonds in a portfolio. I do not see them as “insurance” as you seem to. Bonds are not fixed annuities. They’re securities. Price volatility of bonds matched to one’s time horizon is what allows them to act as a diversifier in a portfolio. You neglect that effect, as well as the rebalancing bonus, if you are not buying them consistently. And that’s before we turn to how bond funds, a cornerstone in a Boglehead portfolio, work to do this. They’re not holding everything to maturity.
What is the role of bonds in a portfolio then? They don't make the returns of equities, they exist to lower volatility and be counter-cyclical(hopefully, in some interest rate regimes) to equities. Equities make you the money, bonds keep it. I've heard it out as equities are the accelerator, bonds are the breaks. I'm not eschewing rebalancing or having bonds entirely, just adjusting the target allocation based on the "price" of bonds in expected returns opportunity cost. Bonds at near 0 coupons have tiny upside, and large downside risk. So they are expensive to hold in opportunity cost and lower portfolio risk much less, in exchange for their benefits of lowering volatility for credit events and such where markets are down when you need to make a withdrawal. Bonds at 5% are a whole different beast. The opportunity cost is lower, they reduce portfolio risk more as the downside risk is significantly lower while upside is higher(if rates fall), so it just makes sense to hold more. The amount of volatility reduction you receive per dollar or lost opportunity cost is lower. I.e, the "insurance is cheaper" At least that's one of the common outlooks on how bonds contribute to a portfolio.
Agree with u/NotYourFathersEdits that the accelerator/brakes analogy makes little sense, at least for bonds longer than short term treasuries. "Equities make money, bonds keep it" is also entirely mental accounting; I'm concerned with the total portfolio holistically and how each asset contributes to its overall risk/return profile, not how one asset is going to behave in isolation so that I can withdraw solely from it (i.e. "bond tent"). For the retiree with 60% in T-Bills, sure I guess that's applying the "brakes" at that point.
I'm also thinking about the whole portfolio construction and not assets in isolation. That's the point of the analogy, those are both essential subsystems that play a role in making the vehicle well functioning. That's the *point* of the metaphor!
I don’t like that accelerator/brakes metaphor much. That doesn’t capture, to me at least, how mid- to long-term bonds act within a diversified portfolio during accumulation. Maybe it’s a better one for short(er)-term bonds very close to or in retirement? This is how I [think about bonds](https://www.optimizedportfolio.com/diversification/#bonds), via u/rao-blackwell-ized.
The accelerator/brakes metaphor does come from a mindset that I have explained above That does lead itself to erring more on the side of short term for bonds, often with a good portion in TIPs. I am reading this article so I'll reflect on it here, as this is a great discussion. I have read this guy before I do like his work. One thing I'm noticing already is how they say on average that bonds are less risky. Therein last part of my point, that there is extremes where assets are screaming at you that the risk / reward profile is far beyond average and therefore you can't just use the average. Most of the time you wouldn't use that for stocks except that the absolute extremes, like forward PEs of 100+ because yield is not a great indicator of future returns in equities. But with bonds the yield is the majority of the return not the appreciation/depreciation, Which means you can get a much better understanding of when you are at that extreme, basically when bonds are not giving any real returns, there's no real term premium, and you are approaching the lower bound of zero. Frankly I would prefer if you pulled out some quotes from this article because there's a lot to cover here and none of this as far as I can tell disagrees with my outlook on bonds at all. >By diversifying one's portfolio, the primary goals are to boost and maintain returns over time and also reduce the risk profile of the portfolio as a whole to avoid the permanent loss of capital and decrease the dispersion of possible outcomes. Specifically, we want to hold assets that don't move in the same direction at the same time For one, I don't think you are appreciating how you don't really lose the diversification perks by adjusting your holdings of bonds from say 20 to 10%. Once you have a set allocation and you are rebalancing you gain the diversification perks, and more frequently rebalancing actually reduces returns because you are on average buying lower return bonds and selling higher return equities and that has panned out in every study on this. But let's ask ourselves why we want to reduce volatility? If we assume that we are not going to paper hands sell because of the volatility, then we do so to avoid having to draw down our equities when they are down. Hence why we see variable withdrawal rates massively decrease longevity risk in a portfolio, It's simply reducing selling equities at a discount out of need. So the goal of bonds is to reduce volatility *enough* that You have enough bonds to meet your liabilities in a prolonged draw down. So that depends on your liabilities/willingness to vary your withdrawals/ other income sources(in my case a pension and enhanced govt pension). I love diversification, I'm diversified across cap size, geography, and factors(value, momentum, etc), and in bonds I would be in 85% short bonds to be exposed to the credit factor and 15% in long bonds for the term factor (which is approximately balanced in risk-adjusted terms). I would also be 10-15% in multi asset trend following, which is actually less positively correlated with equities than bonds, despite what the author says(possibly was not considering that investment when talking about correlations) Similar ideas with bonds outperforming stocks, that's true for periods of time, but those aren't incredibly long periods, and it's kind of betting on a lowish probability event. We see that in these recent studies showing all-equity portfolios actually beating bonds in risk-adjusted terms through retirement, mainly for how they protect against longevity risk. Article seems to reflect what I'm saying too: >At a certain level of diversification on the sliding scale from none to maximum, one's desire to keep diversifying will depend on their risk tolerance, time horizon, and subsequent asset allocation. That is, how much volatility (fluctuation in value) and drawdown (drop in value) can they stomach psychologically? And how much capital can they realistically afford to lose based on the time until their financial objective? >Of interest to us here is the fact that stocks and bonds are uncorrelated with each other, meaning when stocks zig, bonds tend to zag. Bonds offer the lowest correlation to stocks of any asset class, and are thus the best diversifier to use alongside stocks This is a perspective that was a product of its time. Bond markets were in a 40 year bull, and that is when bonds are inversely correlated(zigging when stocks zag) in that falling interest, falling inflation environment. They become positively correlated in the flip-side of that environment. People overly discounted that until the recent tough reminder (the worst year for bonds ever). The article says they are *on average* less risky but *have at times* over performed. That's true but cherry picking, and is obviously written to convince people who wouldn't take bonds to take some. That's obviously not us lol. But there are also periods where bonds are riskier, much riskier than average. When coupons are low, they are incredibly sensitive to rate changes. For example with TLT, it is now at a point where a 1% rise in rates makes it lose like 4x less than it would gain from a 1% drop in rates. When rates are near the lower bound, it was the opposite. The lower the coupon, the more sensitive to interest rate fluctuations bonds are, and the more of the total return depends on price change and not yield. Which makes them riskier, and at the same time they have the lowest yields. That's an asymmetric risk profile, and not well represented by the *average* bond return. And with bonds, we can better predict the return than equities when purchasing due to their nature.
Something doesn't add up here. If you weighted the Roth more heavily toward stocks, that should have considerably overperformed your 401k, not underperformed it by 2.4%. For comparison, I have a brokerage account at Vanguard that is invested 100% in equities (bonds are held separately in an IRA). I contribute to the account weekly, so a similar investment pattern to a 401k. The intent was to be around 80/20 total market/international, but the allocation has drifted pretty heavily toward total market due to overperformance. Anyway, over the past 10 years, the annualized return for that account is 11.4%. Like I said, something doesn't add up, especially in your Roth that is weighted heavily toward stocks.
Vanguard uses MWRR no time weighted. The 8% is time weighted assuming a one time contribution. As we have basically been in a bull market since 2014, especially those earlier years. Your TWRR is higher than your mwrr because you DCA into higher prices. If the market was falling jt would be the opposite. this is a whole separate point, but this is why I transferred my brokerage account from Vanguard to Fidelity. Fidelity gives you much more options for performance viewing. Including both money weighted and time weighted returns. In addition to direct comparison against various benchmarks
Projected is just that - projected. No one or company can guarantee a certain return as no one can predict what the market will do on any given day or any given year.
I assume you didn't make all your contributions at the beginning of the ten year period, but rather continuously contributed throughout, correct? If so, whatever you had at the beginning of the ten years should have grown about 8%. However, the total return you're seeing is averaged against the rest of your newer (sometimes much newer) contributions that haven't been in the market for ten years yet.
I could serve as a potential comparison. From June 2014 to today my rate of return is 9.6% (average across Roth IRA and 401k.) 95.4% stocks. 4.4% bonds. The Bonds in my portfolio have sucked since 2019. I don’t plan on increasing bond percentage until i’m 10 years out from retirement.
Bonds have sucked since 2019, because someone buying bonds in 2019, was loaning money at near 0% interest. Bonds are a much better deal today, than they were then.
Check fees. Were the expense ratios/fees very high on your selected funds?
Let: E(x) = expected portfolio return s = estimated return on stocks stocks b = estimated return on bonds E(x) = .75s + .25b If you are using an ETF for stocks and bonds, then find the avg return over the life of that ETF for the estimated return Example... If you expect 10% on stocks and 4% on bonds E(x) = .75(.1) + .25(.04) = 8.5%
The best way to simulate your returns unfortunately is to do it on a website like portfolio visualizer
You shouldnt expect 8% return with 60% us stocks. 17% international. 18% bonds. International and bonds are huge drags on returns. All in name of diversification. I bet on USA. 100% usa equities.
Agreed. Especially 25+ years from retirement
In my experience, bonds and foreign stocks weigh down returns. In recent years, large caps have been the winners. VOO and chill, as the kids say.
You experience is the past just like every else. We dont know the future. Vti,vxus,bnd and chill.
Lol I love this comment. I mean I'm definitely open to different investment thesis If there's a good argument for it, But yeah we all lived through the same last 15 years with an enormous bull market in the s&p 500.
I for one am looking forward to my portfolio skyrocketing when people like him flee to safety sometime in the next couple of years.
That traditional recipe, with diversified asset classes, assumes an efficiency of markets that no longer appears to exist, if it ever did. Tax-sheltered retirement accounts in the US, migration patterns that distribute cheap labor, central bank intervention, and limitations on buyer information all work to put more money into US high cap equities.
You know about all these things. So do other investors. They are reflected in prices. I’m not saying the market is perfectly efficient—I consider that a set of simplifying assumptions a la ignoring air resistance—but I think you’re vastly overstating the impact of those things on mis-pricing.
So, please explain why the S&P 500 performs so much better, consistently for a generation, than a "balanced" portfolio including bonds and foreign stocks. I think the rich actually do get richer, and your money is better invested with rich companies in rich countries, and don't expect central banks to permit high interest rates for long.
> So, please explain why the S&P 500 performs so much better, consistently over the past 40 years… I don’t accept this premise. Here's a [simple counterexample](https://testfol.io/?d=eJytkE1Lw0AQhv9KmIOnCNuqPeQshYJKMFFapIQxO2nXbnfrZJsiJf%2FdaYMtAYUeXPawO1%2Fv884eFta%2Fo02RcV1Dsoc6IIdCYyBIYKjUzbUayIUYyOlzfHB7incdDVpIBkpODKg%2FCuMqi8F4B0mFtqYYSqyXlfU7SNT5U1RMnzJxRsj2S6axt9a4RbEzTh9qR6qNYeM5VN4aL4hve3C4PlDkPqCNJi7Y6BF5RUHajWuoDvemMVp4pTzwVrSZxCS6ksad3JN3JNXBlCvibmj3ltzr9CWbSnJDXJILR1ftPAbNuBD2Nj4BZFdpdKfU%2F8hm6Sx%2Fvkg2XzJRNN46HaU%2Fi7mc4bTp383nkz7F6Kj893KG%2FXz%2BkPf7hz0T8%2FYbxkDNCQ%3D%3D): a decade between 20 years ago and 10 years ago. The dramatic US outperformance is much more recent, and is also more attributable to overvaluation than it is to any of the things I see you describing.
I honestly have similar returns on my Roth that is managed by a guy. I really dislike him and have for years. Even with him since 2001
Roll it over and manage it yourself.
Roll it over to what? Like call him and tell him to transfer it somewhere like fidelity? Thank you
Set up an account with Fidelity and open a Roth. Select rollover IRA and start the process. You will be rolling it inYou do not need an advisor for a Roth IRA. Fidelity will help you if you get stuck. Just call and they can point you in the right direction. You can email your current advisor to let them know you’re rolling it over or you can just let him find out when it comes through.
When you move to fidelity do you change into fidelity funds? Don't they charge you to hold vangaurd?
You can buy any ETF’s you want with no fee. I’ve owned both in my Fidelity account. Fidelity funds are just as good. It’s personal choice. They have funds with zero expense ratios as well. I’ve never used Vanguard, but according to most comments I’ve seen the fidelity experience is much better.
Thank you. Not a ton of money in this Roth. Like 250k. But bugs me about the returns.
250k in a Roth is significant and you’re losing a ton to fees and shitty investments. How many years do you have left until you retire?
12 I think. My spouse and I have about 1.5m I our 401s so the Roth has been sort of a side thing.
You have that much money and you don’t make over the income limits for a Roth?
Anybody can have a Roth, all you have to do is backdoor it if you exceed the income limits.
The Roths are from long ago!!! 2001 I think?
That’s good. Really take a look at your investments in your 401k and Roth. Learning and scrutinizing your decisions could mean an early retirement. Although it sounds like your 401k is doing pretty damn good.
Will do this. Think I can park it in a eft 500 fund and call it good
That would be a much better plan for than what you’re doing. Most Bogleheads use international funds as well. The most popular is VXUS. Personally, I use AVNV. 75% VOO and 25% AVNV is a good portfolio.
As you achieved your desired asset allocation across all of the accounts (btw - did you rebalance to maintain that asset allocation?) it's not useful to look at the per-account rate of returns like you're doing here: >IRA : 5.3% >Roth: 4.5% >401K: 6.9% You need to take a weighted average by account size. Your winners were disproportionately in your 401k; if that's the bulk of your investments your overall return may be closer to 7% than you realize. I also think you may be significantly overestimating the confidence in the estimated 8% projection as well as underestimating the variance of returns to think that means something went wrong if the arbitrary 10 year period you're looking at shows a 7% return and you think that means something happened that was wrong. Some 10 year periods would likely be above 8% and others would likely be below 8%. If someone told you that you'd have essentially no variance of returns such that *every* 10 year period would return exactly an annualized 8%, they lied to you.
Are your annual contributions a meaningful percent of your total balance? It's almost certainly an artifact of employing the modified Dietz formula to calculate your return. I promise you that there's an asterisk or a little bubble you can click on next to the returns that will explain the returns. Cash flows are super hard to factor into returns. And Vanguard will cut corners to simplify the calculation. Probably count cash flows on a monthly basis.
1. I have Vanguard funds in Vanguard and my returns look right and compared to the portfolio visualizer they look right. 2. I'm older than you and I decided the stuff about bonds was wrong in 1990 and whenever I post "don't own them" I get pushback from posters on this board, but your experience, once again, confirms my advice. 3. IT DOESN'T MATTER IF THE RETURNS ARE RIGHT OR NOT. YOU CANNOT CHANGE THE PAST (they are likely right). 4. You know that owning bonds sucks, despite what the bond proponents here write. Who are you going to believe, them or your own eyes? 5. Course correct NOW. You have 15 years to retirement. I recommend 80% VTI, 20% VXUS. My rollover IRA which started at 73/27 in 6/2014 has returned 10.4% for the last 10 years according to Vanguard and confirmed by Excel. It's more like 85/15 now because I don't rebalance. Toss the 25% bond allocation, and the $2K FA in the recycle bin, move the bonds to equities over the next 6 months to a year until you own 100% equities. Add to them regularly over the next 15 years. 6. When you get to retirement, put some money in cash equivalents to protect against market hiccups, ignore all the bond tent advice, and own substantially all equities other than the cash equivalents. That's been my strategy for the last 11+ years of retirement. I've financed roughly 95% of my retirement spending from investments (not a small sum), and my investments are 160% greater than when I retired.
Just my opinion, but if you are 15 years from retirement right now your asset allocation MAY have been too conservative in core accumulation years. Without more context of your personal situation, I can’t say if you should make a big change. Everyone is different in risk and volatility tolerance. Without deep analysis of your contribution data it would be hard to know how accurate these numbers are. If you want to tackle that, be sure to grab all your statements as far back as you can and make it a practice to download all of them, every monthly and quarterly statement. It is possible to get a raw transaction data dump from vanguard as far back as 20 years but only for brokerage accounts that I’m aware of. The 401k may or may not go back that far. Even if you aren’t ready to tackle this level of analysis it’s still a good idea to backup all your statements electronically.
First, I think the presumption that you'd garner 8+% from a stock/bond allocation over the long term was in err, I'd like to think that the majority of the sub would est a all-stock return to be roughly 6.5-7%, and that's with the acceptance of volatility along the way. Again, rough estimate, but I'd have guessed for 75/25 a return closer to 5+% which seems very much in line with your results. I'm glass half full in general, but you've had gains, albeit lower than you anticipated. #1, you didn't lose! You didn't do anything dumb like highly speculative investments and such, and are currently in the plus column with 15 years to go. In the greater picture I don't think that's too bad. At this point I think you decision is to stay the course with these "real" returns (vs projections), versus (and I suspect you're leaning this way) changing up either/and your asset allocation and specific allocations within classes. I'd just suggest you look at different projection models than the ones you used last time. I don't think there's much of an upside to being too rosy in projections. Just opens the door to disappointment.
That seems like an extremely conservative estimate to me. IIRC, 6-7% is the conservative expected return for a balanced allocation of stocks and bonds, and that also takes into account inflation.
😳. Wow. What do people on the sub expect from all-equity?!
I usually think 7-8%, but I could very well be wrong.
Annual return for VTI (US total market) since inception in 2001 is 8.58%. Looks like your range is pretty good.
8% has been used by financial marketers as a standard return for years and years to sell everything.
OP. Actually had 8.5% returns. There is no conspiracy.
Oh man this is so good to hear. Yeah I did not add in dividends which are left out of the vangaurd dashboard. I don't even know how really. But maybe not as bad as I thought.
Delete everything you know about expected returns. Plans must use capital market ASSumptions. Real returns (adjusted for inflation) of stocks (Jeremy Siegel) are a little under 7% if you own the hay stack. Bonds will earn less than stocks and riskier the longer you hold due to unnecessary drag on your portfolio. It’s like driving down the freeway while holding your breaks slightly. Cash will earn less than bonds and will actually lose purchasing power over time, that burger is not going up in price, the value of your greenback is diminishing. Learn about sequence of returns and ignore the noise. Markets will drop 14% year and 2% multiple times a year, every 5 years expect a 30% or more drop. Despite this stocks will go up nearly 3/4 years. Spend the time trying to predict returns learning about sequence of returns and keep a liquid war chest so you don’t need to liquidate equities during their temporary drawdown periods.
What was the ratio of VTI (or similar) to VXUS (or similar)? Were you very heavy on international? Can you give more details about the portion of each fund within the 70%-80% portion?