My investment account is increasingly and significantly underperforming vs. the S&P 500. What should I do?
Around Oct 03 2010 the SPY closed at 113.  Today it is trading at 130.  After four months, that means that the S&P is up 15% over that particular 4 month period. You said you need something pretty low maintenance, and you are comparing your returns to the S&P 500 (which as @duffbeer703 points out is a good thing to compare against because of its diversification). To kill two birds with one stone, I would sell your fund that you have and take the proceeds and purchase the ETF SPY.  SPY trades like a stock but mirrors the S&P 500's performance. It has extremely low fees (as opposed to what I suspect your BlackRock fund has).  You can own it in an Etrade or Fidelity or other low cost broker account.  Then you will be extremely low maintenance, fully diversified (among stocks) and you don't have to compare your performance against the S&P :) "You say: To clarify, my account is with BlackRock and the fund is titled ""MID   CAP GROWTH EQUITY-CLASS A"" if that   helps. Not totally sure what that   means. You should understand what you're investing in.  The fund you have could be a fine investment, or a lousy one.  If you don't know, then I don't know. The fund has a prospectus that describes what equities the fund has a position in.  It will also explain the charter of the fund, which will explain why it's mid-cap growth rather than small-cap value, for example.  You should read that a bit.  It's almost a sure thing that your father had to acknowledge that he read it before he purchased the shares! Again: Understand your investments." "Typically you diversify a portfolio to reduce risk. The S&P 500 is a collection of large-cap stocks; a diversified portfolio today probably contains a mix of large cap, small cap, bonds,  international equity and cash. Right now, if you have a bond component, that part of your portfolio isn't performing as well. The idea of diversification is that you ""smooth out"" the ups and downs of the market and come out ahead in most situations. If you don't have a bond or cash component in your portfolio, you may have picked (or had someone pick for you) lousy funds.  Without more detail, that's about all that can be said. EDIT: You provided more detail, so I want to add a little to my answer. Basically, you're in a fund that has high fees (1.58% annually) and performance that trails the mid-cap index. The S&P 500 is a large-cap index (large cap == large company), so a direct comparison is not necessarily meaningful. Since you seem to be new at this, I'd recommend starting out with the Vanguard Total Stock Market Index Fund (VTSMX) or ETF (VTI). This is a nice option because it represents the entire stock market and is cheap... it's a good way to get started without knowing alot. If your broker charges a transaction fee to purchase Vanguard funds and you don't want to change brokers or pay ETF commissions, look for or ask about transaction-fee free ""broad market"" indexes. The expense ratio should be below 0.50% per year and optimally under 0.20%. If you're not having luck finding investment options, swtich to a discount broker like TD Ameritrade, Schwab, ScottTrade or Fidelity (in no particular order)" Fire your fund manager. There are several passive funds that seek to duplicate the S&P 500 Index returns. They have lower management fees, which will make returns lower than S&P, and they have less risk by following a broadly diversified strategy (versus midcap growing stocks). There's also ETFs, but evidence is growing that they're not as safe as hoped. But here's the deal: the S&P has been on a tear lately. It could be overvalued and what looks like a good investment could start falling again. A possible alternative would be one of the Lifetime funds that seek to perform portfolio adjustment with a retirement decade target; they're fairly new which mostly means nobody knows how they screw you over yet. In theory, this decade structure means the brokerage can execute trading cash for stocks, stocks for bonds, and bonds for cash in house. absolutely $SPY ETF is the way to go if your point of comparison is the S&P and you want to do low maintenance. "The majority (about 80%) of mutual funds are underperforming their underlying indexes. This is  why ETFs have seen massive capital inflows compared to equity funds, which have seen significant withdrawals in the last years.  I would definitively recommend going with an ETF. In addition to pure index based ETFs that (almost) track broad market indexes like the S&P 500 there are quite a few more ""quant"" oriented ETFs that even outperformed the S&P. I am long the S&P trough iShares ETFs and have dividend paying ETFs and some quant ETFS on top (Invesco Powershares) in my portfolio."
"Here is, from Yahoo Finance, the S&P 500 over the last ~60 years (logarithmic scale):  The behavior since ~2000 has been weird, by historical standards. And it's very easy, looking at that graph, to say ""yes! I would have made so much money had I invested in March '09!"". Of course, back in March '09, it wasn't so clear that was the bottom. But, yes, over the last 10 years or so, you could have made more money by adopting a rule that you'll accumulate cash in a FDIC (or similar) insured savings account, and dump it into an S&P index fund/ETF when the index is n% off its high. Of course, if you look at the rest of the chart, that strategy looks a lot less promising. Start in the early 80's, and you'd have held cash until the crash in 2000. Except for the recent weirdness, the general trend in the S&P 500 (and stock markets in general) has been upward. In other words, to a first-order approximation, the S&P 500 is always at an all-time high. That's just the general trend." "Comparing index funds to long-term investments in individual companies? A counterintuitive study by Jeremy Siegel addressed a similar question: Would you be better off sticking with the original 500 stocks in the S&P 500, or like an index fund, changing your investments as the index is changed? The study: ""Long-Term Returns on the Original S&P 500 Companies"" Siegel found that the original 500 (including spinoffs, mergers, etc.) would do slightly better than a changing index. This is likely because the original 500 companies take on a value (rather than growth) aspect as the decades pass, and value stocks outperform growth stocks. Index funds' main strength may be in the behavior change they induce in some investors. To the extent that investors genuinely set-and-forget their index fund investments, they far outperform the average investor who mis-times the market. The average investor enters and leaves the market at the worst times, underperforming by a few percentage points each year on average. This buying-high and selling-low timing behavior damages long-term returns. Paying active management fees (e.g. 1% per year) makes returns worse. Returns compound on themselves, a great benefit to the investor. Fees also compound, to the benefit of someone other than the investor. Paying 1% annually to a financial advisor may further dent long-term returns. But Robert Shiller notes that advisors can dissuade investors from market timing. For clients who will always follow advice, the 1% advisory fee is worth it." "If they made deposits 20 years ago, and none since, the S&P is up over 300% since then. i.e. a return of $40,000 on $10,000 invested. We wouldn't expect to see that full return, as a prudent mix of stock and bonds (or any treasury bills/CDs, etc) would lower the overall return during this period.  Advice ""Transfer the money, directly to an IRA at a broker, Fidelity, Schwab, Vanguard, etc.""  For most people, going after the advisor isn't worth it, unless the sums are large and the poor management, pretty clear.  The lesson for readers here - monitor your investments. Ask questions. It's not about ""beating the market"" which can actually create more risk, but about understanding the returns you see, and the fees you are spending. The mistake didn't occur at the time the money was invested, but every year it wasn't monitored." Some years your portfolio may perform better than the benchmark, and some years it may be the other way around.  Without a benchmark you will never know. And by the way if you choose poorly, you will never beat the benchmark. If the benchmark goes up 20% but your fund/investment only went up 3% you did make money, but you might want to reevaluate your strategy. I think you're missing Simon Moore's point. His point is that, due to low inflation, the returns on almost all asset classes should be less than they have been historically, so we shouldn't rebalance our portfolio or withdraw from the market and hold cash based on the assumption that stocks (or any other asset) seem to be underperforming relative to historical trends.  His last paragraph is written in case someone might misunderstand him, he is not advocating to hold cash, just that investors should not expect as good returns as has happened historically, since those happened in higher inflation environments. To explain: If the inflation rate historically has been 5% and now it's 2%, and the risk-free-market return should be about 2%, then historically the return on a risk-free asset would be 7% (2%+5%), and now it should be expected to be 4% (2%+2%). So, if you have had a portfolio over some time you might be concerned that the rate of return is worsening, but Simon's point is that before you sell off your stocks / switch investment brokers, you should try to figure out if inflation is the cause of the performance loss. On the subject  of cash: cash always loses value over time from inflation, since inflation is a measure of the increase in prices over time-- it's a part of the definition of what inflation is.  That said, cash holdings lose value more slowly when inflation is lower, so they are relatively less worse than before. The future value of cash doesn't go up in low inflation (you'd need deflation for that), it just decreases at a lower rate, that is, it becomes less expensive to hold- but there still is a price. As an addendum, unless a completely new economic paradigm is adopted by world leaders, we will always see cash holdings decrease in value over time, since modern economics holds that deflation is one of the worst things that can happen to an economy. You could pay off a portion of the debt and your minimum payments should also go down proportionately.  Your investment managers may be able to continue making returns in the markets in a sideways and a bear market. So you have 24k contributing to your net worth, and ~50k giving you a negative net worth. At best, you can bring this down to a negative 25k net worth, or you can start and keep using some of the gains from your investment account to supplement your credit payments (along with your income). This is based on chance that your investment managers can continue making gains, compared to paying down 24k and having possibly zero liquid savings now, but having more of your salary to start saving and make the lowered minimum payments, assuming you don't borrow more. Those are the options I've thought of, I don't see either option being necessarily quicker than the other. "There was a time when everyone felt their goal was to beat the respective index they followed. But of course, in aggregate, that's a mathematical impossibility. The result was that the average say large cap fund, whose benchmark index would be the S&P, would lag on average by 1-2%.  A trend toward ETFs that would match the market had begun, and the current ETFs that follow the S&P are sub .1% expense.  For the fact that studies (Google ""Dalbar"" for examples) show the typical investor lags not by 1% or 2%, but by far more for reasons of bad timing, my own statement that ""I've gotten a return these past years of .06% less than the S&P"" would have been seen many years ago as failure, now it's bragging. It handily beats the typical investor and yet, can be had by anyone wishing to stay the course, keep the ETF very long term." "You are your own worst enemy when it comes to investing. You might think that you can handle a lot of risk but when the market plummets you don't know exactly how you'll react. Many people panic and sell at the worst possible time, and that kills their returns. Will that be you? It's impossible to tell until it happens. Don't just invest in stocks. Put some of your money in bonds. For example TIPS, which are inflation adjusted treasury bonds (very safe, and the return is tied to the rate of inflation).  That way, when the stock market falls, you'll have a back-stop and you'll be less likely to sell at the wrong time. A 50/50 stock/bond mix is probably reasonable. Some recommend your age in bonds, which for you means 20% or so. Personally I think 50/50 is better even at your young age. Invest in broad market indexes, such as the S&P 500. Steer clear of individual stocks except for maybe 5-10% of your total. Individual stocks carry the risk of going out of business, such as Enron. Follow Warren Buffet's two rules of investing:  a) Don't lose money b) See rule a). Ignore the ""investment porn"" that is all around you in the form of TV shows and ads. Don't chase hot companies, sectors or countries.  Try to estimate what you'll need for retirement (if that's what your investing for) and don't take more risk than you need to. Try to maintain a very simple portfolio that you'll be able to sleep well with. For example, check into the coffeehouse investor  Pay a visit to the Bogleheads Forum - you can ask for advice there and the advice will be excellent. Avoid investments with high fees. Get advice from a good fee-only investment advisor if needed. Don't forget to enjoy some of your money now as well. You might not make it to retirement. Read, read, read about investing and retirement. There are many excellent books out there, many of which you can pick up used (cheap) through amazon.com." "Split your contributions evenly across the funds on that list with the word ""core"" or ""S&P"" in the name.  Maybe add ""International Large Cap Index"".  Leave it & rebalance occasionally.  Read a book on Modern Portfolio Theory sometime in the next 5 years." "Since this is your emergency fund, you generally want to avoid volatility while keeping pace with inflation.  You really shouldn't be looking for aggressive growth (which means taking on some risk).  That comes from money outside of the emergency fund. The simplest thing to do would be to shop around for a different savings account.  There are some deals out there that are better than ING.  Here is a good list. The ""traditional"" places to keep an emergency fund are Money Market Mutual Funds (not to be confused with Money Market Accounts).  They are considered extremely safe investments.  However, the returns on such a fund is pretty low these days, often lower than a high-yield online savings account. The next step up would be a bond fund (more volatility, slightly better return).  Pick something that relies on Government bonds, not ""high-yield"" (junk) bonds or anything crazy like that. Fidelity Four in One comes pretty close to your ""index of indexes"" request, but it isn't the most stable thing.  You'd probably do better with a safer investment." You need to do a few things to analyze your results. First, look at the timing of the deposits, and try to confirm the return you state. If it's still as high as you think, can you attribute it to one lucky stock purchase?  I have an account that's up 863% from 1998 till 2013. Am I a genius? Hardly. That account, one of many, happened to have stocks that really outperformed, Apple among them.  If you are that good, a career change may be in order. Few are that good. Joe Oh really. I will have to check into that. It would be a bummer if that is the case. Something I will need to look into. If you don't need margin and are not trading the underlying asset (which I could see being a problem), then I don't see what the problem is. But I shall see. Thanks. "There are probably 3-4 questions here.  Diversification - A good index, a low cost S&P fund or ETF can serve you very well. If you add an extended market index or just go with ""Total market"", that might be it for your stock allocation. I've seen people with 5 funds, and it didn't take much analysis to see the overlap was so significant, that the extra 4 funds added little, and 2 of the 5 would have been it. If you diversify by buying more ETFs or funds, be sure to see what they contain.  If you can go back in time, buy Apple, Google, Amazon, etc, and don't sell them. Individual stocks are fun to pick, but unless you put in your homework, are tough to succeed at. You need to be right at the buy side, and again to know if, and when, to sell. I bought Apple, for example, long ago, pre-last few splits. But, using responsible a approach, I sold a bit each time it doubled. Has I kept it all through the splits, I'd have $1M+ instead of the current $200K or so of stock. Can you tell which companies now have that kind of potential for the future?  The S&P has been just about double digit over 60 years. The average managed fund will lag the S&P over time, many will be combined with other funds or just close. Even with huge survivor bias, managed funds can't beat the index over time, on average. Aside from a small portion of stocks I've picked, I'm happy to get S&P less .02% in my 401(k). In aggregate, people actually do far worse due to horrific timing and some odd thing, called emotions." "I have a similar situation -- five different accounts between me and my wife. Just as you and @Alex B describe, I maintain my asset allocation across the combination of all accounts. I also maintain a spreadsheet to track the targets, deviations from the targets, amounts required to get back in balance, and overall performance. I (mostly) don't use mutual funds. I have selected, for each category, 1 or 2 ETFs. Choosing index ETFs with low expense ratios and a brokerage with cheap or free trades keeps expenses low. (My broker offers free ETF trades if you buy off their list as long as you aren't short-term trading; this is great for rebalancing for free 2 or 3 times a year.) Using ETFs also solves the minimum balance problem -- but watch out for commissions. If you pay $10 to buy $500 worth of an ETF, that's an immediate 2% loss; trade a couple of times a year and that ETF has to gain 5% just to break even. One issue that comes up is managing cash and avoiding transaction fees. Say your IRA has all the growth stock funds and your Roth has the bonds. Stocks do well and bonds do poorly, so you sell off some stocks, which creates a bunch of cash in your IRA. Now you want to buy some bonds but you don't have enough cash in your Roth, so you buy the bonds in your IRA. Not a problem at first but if you don't manage it you can end up with small amounts of various funds spread across all of your accounts. If you're not careful you can end up paying two commissions (in two different accounts) to sell off / purchase enough of a category to get back to your targets. Another problem I had is that only one account (401k) is receiving deposits on a regular basis, and that's all going into an S&P 500 index fund. This makes it so that my allocation is off by a fair amount every quarter or so -- too much in large cap equities, not enough of everything else. My solution to this going forward is to ""over-rebalance"" a couple of times a year: sell enough SPY from my other accounts so that I'm under-allocated in large caps by the amount I expect to add to my 401k over the next 3 months. (So that in six months at my next rebalancing I'm only 3 months over-allocated to large caps -- plus or minus whatever gains/losses there are.)" In my IRA I try to find stocks that are in growing sectors but have are undervalued by traditional metrics like PE or book value; I make sure that they have lower debt levels than their peers, are profitable, and at least have comparable margins.   I started trading options to make better returns off of indices or etfs. It seems overlooked but it's pretty good, in another thread I was telling someone about my strategy buy applying it to thier portfolio: https://www.reddit.com/r/options/comments/77bt17/ive_been_trading_stocks_for_a_year_and_am/dolydu8/?context=3  I double checked, I told him/her I would buy the DIA Jan 19 2018 call 225 for 795. 8 days later it's trading for 1085. Nearly 50% in a week. It'll never be 300% earnings returns, but I'm happy to take it slow.   Shorting is a very different animal it takes a lot to get things right.