Openfolio 59% of investors underperformed Vanguard target date funds.
Did your investment portfolio hit a rough patch last year?
If so, you are not alone.
Investing app Openfolio found that out of 3,000 portfolios, the majority of its users underperformed relative to a particular, reliable benchmark: target-date funds.
Target date funds are mutual funds that are tied to a specific year of retirement and adjust their investment mix depending on how much time is left until the “target date.”
While people have different opinions about whether a target date fund is an effective enough savings method to provide a retiree with the money they need in their post-work life, it is widely recognized that they are relatively conservative and stable investments that They probably won. I don’t see shocking losses or gains over the course of a year.
So, the ideal is to overcome it.
However, Openfolio found that not only did 24% of its users lose money on their investments in 2014, but 35% earned less retirement funds than the target date applicable to their age, meaning 59% had a inferior performance. However, a respectable 41% managed to outperform the fund.
Looking at Vanguard target date retirement funds tied to the years 2020, 2030, 2050, and 2060 with an assumed retirement age of 65, Openfolio found that each had a return of about 7.2% and used this number to calculate how many of their investor portfolios underperformed.
He then took a closer look at the group that lost money to see if their choices provided any insight into why.
Based on the actions of the 24% who lost money, they narrowed the disappointing results down to three reasons, which may sound uncomfortably familiar if you’ve experienced losses in your own portfolio:
Openfolio
Openfolio
Openfolio
There was one bright spot, however: Openfolio found that the number of users making the above mistakes decreased in each successive age group, meaning that older investors were more likely to see stronger returns.
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