Originally Posted by
e6bpilot
The target date funds have been terrible since the bond market took a complete dump post Great Recession and never really recovered.
Yeah, the bond market in 2022 had its worst perfomance in 50 years. 2023 was a lot better though.
Originally Posted by
e6bpilot
Comparing your funds' return to the target date funds is a bad comparison.
Well, it's not like that was the only comparison we made. We also do compare our funds' returns to typical index funds. I find the target-date fund comparison useful because it answers the question, "If we had decided to take a completely hands-off approach to investing, we likely would have just put our money in a target-date fund. Had we done so, what would our returns have been?"
The next level up from that, in terms of investor involvement, would indeed be what you suggest: picking a mix of low-cost index funds and adjusting their allocations quarterly or annually so as to rebalance one's allocations against different investment types. We could have done that hypothetical exercise and compared the returns to our actual managed funds' returns. I just didn't really have the time to do that, but we do see our performance vs. typical indices, so the data is there.
All the data I've seen, though, tells me that for the average investor, engaging an investment advisor to actively manage their investments, generally doesn't mean they will outperform indices in the long run. Where I do think advisors can be useful is in talking you off the ledge when you're tempted to make an emotional decision based on perceived risk. For example, around this time last year, the Federal gov't was very close to defaulting on the national debt, which would have likely sent markets into complete chaos. I asked our advisors to draw up a hedging plan against this possibility, which seemed quite strong at the time. They drew up the plan, but strongly advised me to do nothing. As it turned out, they were right. Had I taken the hedge, or worse yet, had I significantly moved into cash, I would have missed most of the 2023 gains the market eventually made. So I do think advisors can have a very positive impact on some investors' outcomes. Again though, I agree that the average investor will do just fine by simply investing in a balanced mix of low-cost index funds. No argument there...