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Generally it’s reported that the more an investor makes changes to their portfolio the worse their returns are. I am guilty of this as I make several changes per year.
Morningstar’s most recent Mind the Gap report for 2024 reports the following:
We estimate that the average dollar invested in US mutual funds and exchange-traded funds earned 6.3% per year over the 10 years ended Dec. 31, 2023. That is approximately 1.1% per year less than the average fund’s total return (of 7.4%) over the same period assuming an initial lump-sum purchase.
This made me curious about my return over the most recent 10 year period even though it does not align with Morningstar’s timeframe.
Luckily on Vanguard’s app (where the bulk of my investments reside) I can see this clearly displayed.
I was pleasantly surprised that despite my interventions my 10 year return is 7.2%. This is despite a current balanced allocation. I have had a significant, but lower percentage in bonds during that 10 year period.
How has your portfolio fared over the past 10 years, and how active are you in performing portfolio interventions?
I started very early when I was in college. It seemed little risk if you had the right stocks, so I invested my tuition for a few semesters. As in the real world there were many ups and downs, the good news I graduated as planned and overall came out just a tiny bit ahead, thankfully. From that experience I learned more each year, and then after IRA’s came out took an extra college course to become a better investor. Never used a Financial Advisor, and again thankfully it has all worked out, because if you start early as I did, and saved, compounding had time to do its job, like 60 years of compounding. Everyone please teach your children about compounding. Now, I live off my nest egg and my last 10 years average is a gain of an average of 14% per year. We hope we can keep that going and David keep these fine articles coming.
While I have all our account clustered in Quicken, I always doubt their ROI calculations. It is impossible to tell if they use the true beginning and ending values on multiple account or the whole.
If anyone else has solved this please let me know.
I also do not know the methodology at Schwab and Fido, so don’t know if they accurately track withdrawals and additions.
You would think it would be straight forward, but not. All I know is we have more money now than we did 10 years ago, despite college expenses and buying a new house!
I’m responding because of your comment about Schwab and Fido (Fidelity). I have less experience with Fido, but I can assure you Schwab does a good job of differentiating (under portfolio performance) between return on investments and withdrawals and additions. (Actually I find both equally interesting, as withdrawals and additions certainly matter.) I often run various time frames to get a better idea how I’m doing. (My 10 yr annualized return at Schwab is 14.5%, which is lower than the S&P 500 on what I believe is a more conservative portfolio.) Note however that Schwab explicitly identifies external accounts as “unavailable for performance.” These things may change, this is what I observed this morning.
I don’t know offhand as not all assets are with one custodian who tells me every time I log on. While we’re not all in index funds, I suspect our return is similar to that of an indexed portfolio with 70% in stocks and a third of those in international. Maybe a bit better, maybe not quite as good. But I don’t know this for sure.
I also have no interest in making any effort to figure it out with any more granularity. Whatever our last ten years’ return was, I wouldn’t do anything different with that information. We have what we need today and are comfortable with how it’s allocated today for tomorrow.
David
I also use Vanguard and have 2 major Funds…Healthcare for wife’s Roth and Wellington for our combined as I call it Emergency Fund……..out total return for 10 years is 8.6% with no adjustment…..have had both for over 20 years and take out when needed and add when I think about it……it has been easy with no stress and we DO NOT Chase % return
8.7%. It seems that results is all about individual choices. Those with a few points higher or lower may be due to asset allocation based on risk tolerance.
I was also pleasantly surprised by my 10 year return after reading the Morningstar article. Despite having a very balanced portfolio my 10 year return is 7.6%. I keep a relatively fixed portfolio of index funds in my 70:30, 70:30, 70:30 portfolio. 70% equities 30% bonds; 70% US, 30% International; 70 total market and 30% value, small cap.
I only rebalance once yearly and never “sell” a position. I only rebalance with dividends, interest, or new money. With end of the year giving, I may “sell” a position by transferring shares FIFO to my Vanguard Charitable Fund and then use new money to replace what was sold to rebalance appropriately.
Mostly Vanguard but so far 9.4%
In our Vanguard accounts (all stocks) 11.5%.
“I can’t complain, but sometimes I still do.” — Joe Walsh.
AA = 50/50. 10yr CAGR = 5.7%. (1 yr CAGR = 22%!, a rather stunning, if not useless, number considering the AA).
Sorry, I don’t understand your abbreviations
AA = Asset Allocation
CAGR = Compound Annual Growth Rate
Clearly, this is heavily if not entirely dependent on asset allocation. My target allocation is currently 50-45-5 (actual 51-44-5), and I believe has been aimed no higher than 50% stock for the entire ten year period. Comparing my returns to someone whose allocation is 80-20 seems of little value.
However, Vanguard tells me that my 10 year return is 6.2%, my five year return is 6.6% and my one year return is a surprising 20.8%. My stock allocation had reached 53% before I rebalanced last month.
I wholeheartedly agree. It’s pointless to compare 10-year rates of return without knowing each person’s asset allocation.
It’s also important to acknowledge that the most recent decade does not include the bear market of the 2008-9 Great Recession. Your 10-year return is heavily dependent on which 10-year period you consider.
I doubt that you’d be as pleased with your 10-year return if your decade began in the year 2000.
Good point. Vanguard won’t give me data for that decade. I do have some old records on my hard drive but not for that specific time period. However, using an online calculator, my annualized ROI from March 2003 to April 2012 was 5.57%. Do I feel pleased or embarrassed?
Hey Kathy, I believe your return is still greater than inflation during that time period, which was quite low, so overall you should be pleased.
Thank you!
I too use Vanguard so was able to easily find my return. It was 7.8% for the ten year period but I have a heavier stock allocation over that period. Earlier allocation was around 90% stock, more recently it is 75% stock all in index funds I should add.
So your return has beat the average return on what Morningstar I guess considers a generic dollar invested in the markets.
Good for you!
FYI per SoFi. The S and P 500 from mid 2013 to mid-2023, the average S&P 500 return for the last 10 years is 12.39%.
I like to compare my returns to Vanguard’s Target Date 2020 as that is the year we retired. Their 10 year return is 5.65, and 5.35 for the category overall, so I am pleased that we are beating those bogies.
Since I usually only do portfolio ROI yearly or from inception, I didn’t have that number handy. So I had to “compute” it.
From 10/1/2014 through 9/30/2024 our portfolio ROI was 7.76%.
This is an interesting question. Without telling us your allocation between stocks and bonds, you number is less meaningful. My own allocation until the last year has been 50-50. During the last year the stock allocation has been increased to 60%. My return over the ten years ending on 9-30-24 is 4.21%….However, I am retired and living off of SS and my portfolio……
As mentioned above my current portfolio is balanced or 50/50, but was previously about a 5 to maybe 10 percent greater equity position prior tho that.