I don’t know much about investing, so I pay an advisor to manage my old 401k. They charge 0.25% every quarter.
I rarely check it and was happy to see it was up 19% last year. Then I compared it to what the indexes did, and they seemed to be up 28-30%. My friend’s index and target date funds were also up 28-24%.
Now I’m wondering, is 19% something I could have done myself? Should I expect more? How do I even bring this up with my advisor?
Check how your portfolio did in 2022. If it dropped less than two-thirds of the S&P 500’s loss, your advisor might be doing their job. It’s tough to accept when you’re down as much as the market during bad years and then only make two-thirds of the gains in good years.
@Case
You’re saying to give them credit for minimizing losses, but isn’t it also their job to maximize gains?
Keaton said:
@Case
You’re saying to give them credit for minimizing losses, but isn’t it also their job to maximize gains?
That depends. If they are reducing risk overall, it could be worth it. But if they’re not giving you enough upside to justify their fee, it’s a problem.
@Tanner
Fair, but I still feel like I’m paying too much for mediocre results.
Keaton said:
@Tanner
Fair, but I still feel like I’m paying too much for mediocre results.
Keeping a lot of cash on hand to buy during downturns sounds good in theory, but it often underperforms staying fully invested over time.
@Vesper
That’s true, but I’m not sure my advisor is helping me time the market or diversify effectively.
Keaton said:
@Vesper
That’s true, but I’m not sure my advisor is helping me time the market or diversify effectively.
It sounds like your advisor isn’t being aggressive enough. Did you tell them you’re okay with higher risks for potentially bigger gains?
Keaton said:
@Tanner
Fair, but I still feel like I’m paying too much for mediocre results.
I’m an advisor, so here’s my perspective:
We don’t just focus on investments. We look at the whole picture—your goals, tax strategies, and estate planning.
Just picking QQQ or VOO isn’t always right for everyone. Your friend may be younger or have a different time horizon.
Timing the market is risky. Sticking to a plan is usually better.
Advisors offer peace of mind. Some people don’t want to worry about money or make rash decisions during downturns. That’s worth the fee for many clients.
@Logan
Fair, but if someone just wants to track the market, isn’t VOO a simpler and cheaper solution? Advisors should add value beyond just matching the index.
Jamie said:
@Logan
Fair, but if someone just wants to track the market, isn’t VOO a simpler and cheaper solution? Advisors should add value beyond just matching the index.
Totally agree. Not everyone needs an advisor, and some advisors don’t add value. But for those who want help managing complex finances or staying disciplined, we can be a good resource.
Keaton said:
@Tanner
Fair, but I still feel like I’m paying too much for mediocre results.
It’s not bad advice, but some people get upset when they see lower returns than the S&P 500. It depends on the person’s goals and how much risk they want to take.
What did you tell the advisor about your risk tolerance? If you’re in bonds or a balanced portfolio, that could explain the lower return compared to 100% equities.
Corey said:
What did you tell the advisor about your risk tolerance? If you’re in bonds or a balanced portfolio, that could explain the lower return compared to 100% equities.
This is important. Did they ask questions like, ‘How would you feel if your $10,000 investment lost 20%?’ Your answers guide how they allocate your portfolio.
Corey said:
What did you tell the advisor about your risk tolerance? If you’re in bonds or a balanced portfolio, that could explain the lower return compared to 100% equities.
I don’t remember saying I wanted low risk. I’ve got a house and kids, but I’m not retiring anytime soon. Maybe I should double-check what I told them.
@Rowan
Yeah, it’s worth asking what you’re actually invested in. That’ll help clear things up.
Are you 100% in stocks? If not, what’s the mix? 19% isn’t bad depending on how diversified you are.
Val said:
Are you 100% in stocks? If not, what’s the mix? 19% isn’t bad depending on how diversified you are.
But 19% is still way behind the S&P 500, which returned about 31% last year. Why pay fees if they can’t even come close?
@Haven
Not everyone should be 100% in stocks. If someone is closer to retirement, they might need a more balanced portfolio.
What are your goals for this money? When do you plan to use it?