or Connect
Styleforum › Forums › Culture › Business, Careers & Education › Talking stocks, trading, and investing in general
New Posts  All Forums:Forum Nav:

Talking stocks, trading, and investing in general - Page 684

post #10246 of 11163
Quote:
Originally Posted by msg View Post

I have an IRA that has the following characteristics:

1) Unrealized gain of 7% YTD
2) Realized loss of $12,000 YTD
3) Previous year realized gain of $3,000

It's a small amount of money that's being managed on my behalf by an advisor. These numbers seem strange to me and I'm trying to figure out whether the advisor is doing a good job. The $12k loss seems weird, it was from a sale of a bunch of different assets.

For an IRA, how should I be thinking of evaluating the advisor's performance?

For one thing, I'm not sure what the point (aside from complexity for the sake of obfuscation) is of distinguishing between "realized" and "unrealized" gains and losses in an IRA. Maybe I'm missing something, though.

Kind of tough to evaluate the performance without knowing what happened before as a baseline -- e.g., the assets underlying the "realized" loss. But as a starting point, I think that if you don't understand what the advisor is doing and don't have an obvious benchmark for evaluating his or her performance, that's a problem right there. Maybe you've done all this, in which case apologies, but first off I'd have a very basic conversation with the advisor about what your goals are for this IRA and what might be a reasonable way to evaluate progress toward those goals. And, of course, how the advisor is being compensated and how you can meaningfully evaluate what you're getting in return.
post #10247 of 11163
Quote:
Originally Posted by lawyerdad View Post

For one thing, I'm not sure what the point (aside from complexity for the sake of obfuscation) is of distinguishing between "realized" and "unrealized" gains and losses in an IRA. Maybe I'm missing something, though.

Kind of tough to evaluate the performance without knowing what happened before as a baseline -- e.g., the assets underlying the "realized" loss. But as a starting point, I think that if you don't understand what the advisor is doing and don't have an obvious benchmark for evaluating his or her performance, that's a problem right there. Maybe you've done all this, in which case apologies, but first off I'd have a very basic conversation with the advisor about what your goals are for this IRA and what might be a reasonable way to evaluate progress toward those goals. And, of course, how the advisor is being compensated and how you can meaningfully evaluate what you're getting in return.

Thanks for the advice. In general, the advisor's done a good job, everything else under management is significantly up.

The realized loss was an aberration - seemingly - and I'm just trying to educate myself better on whether it's indicative of poor management? Or just a natural part of an IRA where you take a loss in order to move the money into a better future investment?

If it was an obvious explanation, I'd want to figure it out myself.
post #10248 of 11163
Quote:
Originally Posted by msg View Post

Thanks for the advice. In general, the advisor's done a good job, everything else under management is significantly up.

The realized loss was an aberration - seemingly - and I'm just trying to educate myself better on whether it's indicative of poor management? Or just a natural part of an IRA where you take a loss in order to move the money into a better future investment?

If it was an obvious explanation, I'd want to figure it out myself.

Well, I think it's perfectly normal and appropriate that if a particular investment or set of investments aren't working out and the advisor thinks there are better places to put the money, they'd sell and re-deploy. The whole point of an IRA is tax avoidance or deferral, so issues of "realized" vs. "unrealized" shouldn't have the same significance as they would in a taxed account.

I'd certainly say that fact that there's a significant loss in the account is not itself indicative of poor management. It's really the overall performance I'd look at -- has the overall value of the account (after accounting for any new contributions) increased over time, and by how much? In an account with ten positions open, I'd much prefer one where 9 have had $5,000 gains and one has had a $12,000 loss over a ten year period than one where all ten positions are up exactly $1.22 over ten years.
post #10249 of 11163
Quote:
Originally Posted by lawyerdad View Post

Well, I think it's perfectly normal and appropriate that if a particular investment or set of investments aren't working out and the advisor thinks there are better places to put the money, they'd sell and re-deploy. The whole point of an IRA is tax avoidance or deferral, so issues of "realized" vs. "unrealized" shouldn't have the same significance as they would in a taxed account.

I'd certainly say that fact that there's a significant loss in the account is not itself indicative of poor management. It's really the overall performance I'd look at -- has the overall value of the account (after accounting for any new contributions) increased over time, and by how much? In an account with ten positions open, I'd much prefer one where 9 have had $5,000 gains and one has had a $12,000 loss over a ten year period than one where all ten positions are up exactly $1.22 over ten years.

Good advice, thank you

Here's what it looks like visually:



the space in between the dark blue line and the light blue line represents positive earnings. So, in general, it’s been positive. But, then in July 2015 the performance started to tank. There was another rebound and then things went down again. The point at which the line dips into the light blue is when the stock sale happened (the -$12k). What I don’t understand yet is whether these dips correspond to overall market performance or whether it’s because of several problematic stocks (hence the sale, even though it resulted in a loss) or whether it’s because of poor management.
post #10250 of 11163
Quote:
Originally Posted by msg View Post


Thanks for the advice. In general, the advisor's done a good job, everything else under management is significantly up.

The realized loss was an aberration - seemingly - and I'm just trying to educate myself better on whether it's indicative of poor management? Or just a natural part of an IRA where you take a loss in order to move the money into a better future investment?

If it was an obvious explanation, I'd want to figure it out myself.



How do you know he's done a good job?  To echo off something LD said, what's your frame of reference?  The Dow Jones is up 20% from the beginning of the year S&P is up 15%.  Is your advisor beating that?  Is he beating that after his fees?

 

I ask because most financial advisors aren't worth the money, to be honest.  You'd be better off just putting your money in a few funds to balance your risk and letting it sit.

post #10251 of 11163
Quote:
Originally Posted by msg View Post


Good advice, thank you

Here's what it looks like visually:



the space in between the dark blue line and the light blue line represents positive earnings. So, in general, it’s been positive. But, then in July 2015 the performance started to tank. There was another rebound and then things went down again. The point at which the line dips into the light blue is when the stock sale happened (the -$12k). What I don’t understand yet is whether these dips correspond to overall market performance or whether it’s because of several problematic stocks (hence the sale, even though it resulted in a loss) or whether it’s because of poor management.

 

Here is what I see:

 

1.  2015 was a flat year for the S&P 500.  You seem to have slight gains over this period so I do not know if it was due to the new money you put in around June or not.  I am unsure if the blue line is a % measurement or a $ measurement.  I would be $ measurement as most of my accounts do this.

2.  There was a market sell off in August 2015 which is what the dip might be for 2015 though I would expect to see more of a severe drop unless he had you in cash or something and bought after that drop so you experienced less impact.

2.  The sale in February again corresponds to a market sell off.  Since we do not know what asset you were in there is no telling why he sold it.  

 

But comparing your YTD +7%, the Dow Jones is up 6.6% and the S&P is up 4.6%.  For reference, my 401k is up over 10% (all in S&P 500) this year based on every 2 weeks purchases so I bought in February when it was low and other times as well.  Making money in the market takes continued investment in good times and the bad if you expect it to increase over time which we all think it will otherwise we would be buying gold or something.

post #10252 of 11163
Thanks everyone for the perspective
post #10253 of 11163
Id only add that in your next conversation w your IA you'd likely want to ask if this historical performance summary is
Gross or net of his fee/commission?
G/N of transaction costs? eg prime broker
G/N any embedded vehicle costs (unless all direct stocks/bonds)
G/N custodial charges?
...you can bug about inflation too tho that's almost certainly still in there.

Def ask the first question about his comp tho.
post #10254 of 11163
Just reviewing some of my positions. Bought a big tranche of QQQ in 2011 at $47.77 and today it's over $117 and been paying dat dividends. I know that's child's play in this thread but I'm good with it.
post #10255 of 11163
Quote:
Originally Posted by Piobaire View Post

Just reviewing some of my positions. Bought a big tranche of QQQ in 2011 at $47.77 and today it's over $117 and been paying dat dividends. I know that's child's play in this thread but I'm good with it.

for a complete noob like me, that's impressive 👍🏾👊🏾
post #10256 of 11163

I don't know if I have mentioned this but I may refinance our house again as fees are pretty low and it would be roughly a 0.75% better rate.  I would still pay our current mortgage payment and just saving on interest.  I think I would save roughly $20K in interest over the life of the loan.  

post #10257 of 11163
Quote:
Originally Posted by jbarwick View Post

I don't know if I have mentioned this but I may refinance our house again as fees are pretty low and it would be roughly a 0.75% better rate.  I would still pay our current mortgage payment and just saving on interest.  I think I would save roughly $20K in interest over the life of the loan.  

Do you really save though? I have never really sat down to calculate it, but in my gut I wonder how is it savings when you start over at the year 30 countdown whereas you were in year 22 and had amortized down to the point that you were starting to build up principal payments. Now you are back to mostly interest + some principal.

.75 is a significant adjustment, but I also question the logic when it costs 3-8k to refinance, it will take quite a while to pay that back, and then you are hooked for another 6 years of payments. This is a random example, obviously.

A refi down to 15 makes sense, etc. But recently I encountered an older person that refi'd because they wanted a small payment... now, in their 60s they start again at 30 years?

Not questioning your math re the 20k, it's just that I notice refi's are a bit overused.
post #10258 of 11163
Quote:
Originally Posted by idfnl View Post

Do you really save though? I have never really sat down to calculate it, but in my gut I wonder how is it savings when you start over at the year 30 countdown whereas you were in year 22 and had amortized down to the point that you were starting to build up principal payments. Now you are back to mostly interest + some principal.

.75 is a significant adjustment, but I also question the logic when it costs 3-8k to refinance, it will take quite a while to pay that back, and then you are hooked for another 6 years of payments. This is a random example, obviously.

A refi down to 15 makes sense, etc. But recently I encountered an older person that refi'd because they wanted a small payment... now, in their 60s they start again at 30 years?

Not questioning your math re the 20k, it's just that I notice refi's are a bit overused.

This shows a failure to understand how mortgages actually work. The interest cost in any given month on a balance will always be the interest cost in that month. Divide your interest rate by 12 and then multiply that by the outstanding balance. That interest calculation is exactly the same formula for your first payment as for your last payment. Common wizdumb is the "interest is paid up front" on a mortgage and that is completely wrong.
post #10259 of 11163

We originally went from a 30 year mortgage to a 15 year mortgage, thus saving long-term interest.  If we refinance now, as I mentioned in my post, is that we would continue to pay our current mortgage payment, just with a lower rate so we would save on interest from here on out which we are at like 14 years.  Rates are down that much YoY.  I would look at refinancing costs but I know at least $400-$500 for an appraisal then whatever fees are.  There are a lot of low fee options but at a higher rate than I want or more fees and a lower rate.  I am looking for a 15 year, 2.5%, no-fees or at least <$500 which seems possible.  

 

The savings are minimal at less than $1,000 per year as we would still continue our path to pay off in the 14 years we have left but it would ultimately be less than that with a lower interest rate and larger principal payments each month.

post #10260 of 11163
If you're making the same monthly payment, the real issue is how many months you're avoiding by shortening the term. Present value of those payments is your win.

Also to be considered: risk reduction and enhanced mobility by building equity faster and having some number of years with no monthly payment due. Those aren't purely financial (as in mathematical) factors, but may be helpful on the few days when models and financial markets break down entirely.
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: Business, Careers & Education
Styleforum › Forums › Culture › Business, Careers & Education › Talking stocks, trading, and investing in general