• Matt Morizio

Your returns matter, a lot

After three separate conversations last week about how poorly people’s investments are performing over a multi-year period, I realized there is an issue I need to address.

Talking future performance returns in the investing industry is taboo. The SEC, rightfully so, doesn’t allow advisors in any way, shape, or form, to persuade others by promising future results.

So, let the record show, this blog is NOT about what Beck Bode’s future performance expectations are.

Back to my conversations - the three people who approached me said something like this, "I don't think my investments are performing very well. Does X percent sound low (1, 2.5, and 4%)?"

Depending on your investing goals, 1%, 2.5%, or 4% may fall right in line, but for these people it didn’t. They were trying to grow their money. They weren’t trying to be conservative. They deserved better.

Two of the three weren’t even keeping up with inflation, which raises on average 3% per year. The other wasn’t a whole lot better at 4% annualized.

I get it, returns are never guaranteed, and nobody can predict the future, but if the S&P returns about 12.6% annualized (assuming dividends are reinvested) from May 2013 to May 2018 , and you want your money to grow, the growth portion of your allocation should be somewhere around that number, not between 1-4% like the people I talked to last week.

If you’re in this position, what should you do?

Be proactive. Take action. Always look at your returns through the lens of your goals and risk tolerance. Those determine your allocation.

Now look at your monthly statement. If your performance over a 5+ year period isn’t keeping up with its appropriate benchmark, ask questions:

Why the underperformance? Should you adjust the allocation? Have your goals changed? Does an index fund make more sense if you are overpaying an active manager to underperform?

Most importantly, don’t wait for a major life event to reassess your investments!

Our personal health, bet it physical, financial, spiritual, or emotional, is almost always a back burner item until a major life event happens. Then it comes to the forefront for a short time, only to slowly move back as the dust settles.

How often do we change jobs, have a child, experience the death of a loved one, buy a home, etc, and say to ourselves, “Now I’m going to get my eating right, get back to the gym, get my finances in order, go back to church, etc.”

There is no reason to wait for a major life event. Take action today. It could make you a whole lot more money in the long run.

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Investment advice offered through Beck Bode, LLC, a fee-only Registered Investment Advisor in the Greater Boston area.