$400 a month invested in IRA only netted me $200 in 10 months?!

[Linda marshall]

I have to say that one of the real benefits of discovering manufactured spending this year has been that it has opened my eyes about my financial situation overall-- I've started to take some interest in where things stand and how I can really start using my money to work for me! In line with this pursuit, I was setting up Mint.com this morning and in doing so, logged into my Vanguard IRA. If you had asked me last year, I would have been thrilled at the idea of having any amount of money set aside in an IRA and wouldn't have given the actual amount a second thought (I know, it's sad.) Now? I'm utterly shocked to find that this year alone, despite depositing $400/month, my net increase since January 15 is only $248!!! I was under the naive impression that the economy has been on the upswing this year. Either I am wrong about that or I need to make some adjustments to either how vanguard is spending my money or where I am investing it.
Is it just me or does this "rate of return" seem particularly low considering the fluctuations over the past year?

Some details in case they are necessary:
The account type: "Vanguard Total Stock Market Index Fund Admiral Shares"
Contribution: My monthly contribution is divided into two payments ($200 from my account/$200 from my husbands) -- Q: does it make any difference if I have a single $400 deposit or 2 $200 deposits?
If I remember correctly, my age plays at least some role in how I should be investing, so for the record, I am 48.

The website only goes back 10 years, but I'm pretty sure I've been investing with Vanguard for closer to 20 years. (Hmmm, I wonder why they don't show more than 10 years?) I didn't always contribute the maximum and I know the market has had some pretty big swings during the past 2 decades, but I'm surprised to see that my current portfolio is worth only $56K (peaked at around 63K in July). That seems low compared to the amount I must have invested over the years. Does this sound low to those of you with knowledge in this area? I do realize the question is difficult to answer with any certainty without knowing more about $ amounts and how the funds were invested, but in general, does this seem like it falls within an average range?

Assuming I need to make adjustments here, without knowing a lot about the stock market/IRA investing and with even less time to learn about it in any great depth, are there any suggestions for how I proceed from this point?

Certainly for those of you who are financially minded, my lack of awareness must seem pathetic, but please be kind and take heart- at least I'm looking!!

 

[Matt]

Either I am wrong about that or I need to make some adjustments to either how vanguard is spending my money or where I am investing it.
Is it just me or does this "rate of return" seem particularly low considering the fluctuations over the past year?

So.. .the root of your problem is that you thought the market was doing well, but it isn't. Vanguard isn't the problem, they just track the market. The rate of return for the year is accurate, and bad. It's a bad year (particularly a bad Q3) this happens all the time with stocks, which is why they talk of 'average rate of return'.

The account type: "Vanguard Total Stock Market Index Fund Admiral Shares"

Great fund, nothing wrong with it other than its pure equities which by nature have more volatility, meaning that you'll have bad years like this one.

Contribution: My monthly contribution is divided into two payments ($200 from my account/$200 from my husbands) -- Q: does it make any difference if I have a single $400 deposit or 2 $200 deposits?

Makes no noticeable difference.

If I remember correctly, my age plays at least some role in how I should be investing, so for the record, I am 48.

The idea is that the stock market can drop by maybe 50% in any given year. If you are planning to retire at 65, by 48 you should be a certain way towards earning 100% of your 'goal number' for retirement (the number that you need to carry you forward when you stop earning income from a salary/business) people use diversification to protect their assets, drifting from stocks to bonds to cash to remove the chance that you lose half your wealth and have no time left to replace it. This notion is referred to as a glidepath. I talk about glidepaths here, it gets a bit more exotic, but the intro should explain them: https://saverocity.com/finance/glidepath-averaging-and-diversification/

That seems low compared to the amount I must have invested over the years. Does this sound low to those of you with knowledge in this area? I do realize the question is difficult to answer with any certainty without knowing more about $ amounts and how the funds were invested, but in general, does this seem like it falls within an average range?

Impossible to answer without knowing what you put it. If you want to know what your basis is (what you put in) then you can change the tab from balances, to balances over time and it shows your investment returns. The url is here, maybe if you log in and click this link it will jump to your data: https://personal.vanguard.com/us/myaccounts/balancesovertime you'll see a figure called 'investment returns'. This is your gain.

Assuming I need to make adjustments here, without knowing a lot about the stock market/IRA investing and with even less time to learn about it in any great depth, are there any suggestions for how I proceed from this point?

Its hard to see with just a little window on where you are, but you might want to change allocation to something that pays you less.

It sounds counter intuitive (you want more right!?) but the point is that you're disappointed today because of the range of movement of being 100% in equities (stocks) you don't log in daily so you missed the bad swings, but basically your total performance is down because things are down right now.

Unfortunately there isn't going to be a stable investment that will pay you more than the fund you have with Vanguard- you might get lucky and find a winning company or two, but that isn't stable enough. Therefore, you might want to slow things down by mixing in bonds...

Bonds suck too (due to low interest rates and them rising soon), but when your stocks dropped, often the bonds held their ground, meaning the total investment is anchored in a smaller downside (and upside) range.

To take advantage of the diversification between stocks and bonds one of the best DIY solutions is to go with a Target Date Fund. Pick your retirement year, and buy that fund. If you want more risk then pick a later year, less risk, an earlier year. They track the glidepaths of age into retirement.

https://investor.vanguard.com/mutual-funds/target-retirement/#/

Finally - understand that expectations for a 60/40 portfolio is lowered to about 5% at best right now.

 

[Free-quent Flyer]

I think many people would consider 48 to be relatively late to be starting to move into bonds, and as @Matt points out yields are going to be going up so buying bonds now is not exactly a powerplay.

Since you're not comfortable with the volatility of equities, the first thing to do is stop buying them! Continue to make your regular contributions (to maximize your tax-advantaged retirement assets), but change what you're buying. Here are two of the many ways you could do this:

1) Buy a target retirement date fund instead of VTSAX. You're 48, so you can be ultra-conservative and buy a 2025 fund or slightly-less-conservative and buy a 2035 fund, but it won't make /much/ of a difference.
2) Buy a short-term bond fund, something like VBISX. The argument for the short-term fund is that rates are going up (well, they aren't going down), so you want to "keep your powder dry" for when you can buy into bond funds with higher yields, perhaps 4-6 years from now.

The argument for #1 is that that's where you eventually want to get to: a fund that will maintain your assets as stably as possible once you enter retirement. The argument for #2 is that #1 will leave your overall asset allocation out-of-whack since you'll still have more equities (your existing shares) than an asset allocation based solely on a target retirement date fund would have.

That leaves option #3:

3) Sell all your VTSAX, move it into whichever target retirement date fund you prefer, and then continue to buy that target retirement date fund with your regular contributions. Never think about it again.

The upside of this will be that your retirement account will be on a single, known "glide path" from equities to bonds. The downside will be that you'll be locking in this year's lame stock market returns. In my super personal super unprofessional judgment the benefit of the former probably slightly outweighs the pain of the latter, but that's a judgment call.

Alternatively, you could commit to moving your $56k in VTSAX gradually over into a target retirement date fund, perhaps over 2-3 years, in addition to your ongoing contributions to that target retirement date fund. That would expose you to additional volatility (remember, your asset allocation will still be heavily in equities), but let you take advantage of any stock market upside in the next 2-3 years.