FREE NEWSLETTER
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.