Question about the stock market

[Anonymous]

I'm a teacher, and a colleague of mine is trying to move her money in her 403b plan from Equitable to a new company that allows her access to low fee Vanguard funds.

She put in the request to transfer her funds (from a former employer) and salespeople from Equitable have been writing her to express their dismay. They are telling her that they are surprised she wants to move her funds, because her account gained 21% over the last year, so it is doing really well.

Here's my question - is 21% a lot? I don't really understand how people calculate how well the stock market is doing. But when I look online, at least, it seems to me the S&P 500 increased 36% from Oct 2023 to Oct 2024. Am I understand that correctly?

That's my actual question. Is that how you calculate how well a different fund (eg. VTSAX) did over the past 12 months... this chart basically?

https://ycharts.com/indicators/sp_500_1_year_return

If not, can you explain it to me like I am a kindergartener please? (-:

[Anonymous]

Returns are evaluated against a benchmark. If a large-cap growth and value fund, the relevant index might be something like the S&P 500.

It's more complicated than that, though, because you have to also consider volatility (risk). Sometimes funds with outsize returns achieve those by taking on more risk. Some investors are ok with that, others are oblivious.

Also be sure to compare returns after expenses. Vanguard funds have extremely low expenses compared to most others, which helps improve total return. See https://www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses

[Anonymous]

Returns are evaluated by taking the percent change in the value between its value on whatever starting point date you had vs whatever the value is on the current date or whatever ending date you want to check on

[Anonymous]

Anonymous wrote:Returns are evaluated against a benchmark. If a large-cap growth and value fund, the relevant index might be something like the S&P 500.

It's more complicated than that, though, because you have to also consider volatility (risk). Sometimes funds with outsize returns achieve those by taking on more risk. Some investors are ok with that, others are oblivious.

Also be sure to compare returns after expenses. Vanguard funds have extremely low expenses compared to most others, which helps improve total return. See https://www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses

yes, that part I understand. 403b plans unfortunately are lousy with mostly high fee options, and Equitable's offerings are the worst offenders (charging something like 2% I think) which is why my colleague wants to change.

But I was specifically trying to put her "advisor's" comment into context for her. I don't think 21% growth this year is anything much to brag about, since I think just an index fund would have returned more than that over the past year.

[Anonymous]

Anonymous wrote: Vanguard funds have extremely low expenses compared to most others, which helps improve total return. See https://www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses

It's really sad. Most teachers don't have access to Vanguard funds in our (non-ERISA) 403b plan offerings. I think this may also apply to hospitals and universities, too.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Returns are evaluated against a benchmark. If a large-cap growth and value fund, the relevant index might be something like the S&P 500.

It's more complicated than that, though, because you have to also consider volatility (risk). Sometimes funds with outsize returns achieve those by taking on more risk. Some investors are ok with that, others are oblivious.

Also be sure to compare returns after expenses. Vanguard funds have extremely low expenses compared to most others, which helps improve total return. See https://www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses

yes, that part I understand. 403b plans unfortunately are lousy with mostly high fee options, and Equitable's offerings are the worst offenders (charging something like 2% I think) which is why my colleague wants to change.

But I was specifically trying to put her "advisor's" comment into context for her. I don't think 21% growth this year is anything much to brag about, since I think just an index fund would have returned more than that over the past year.

So you don't even understand the most basic of basics regarding the stock market yet begrudge financial advisors' earning a living by helping others invest and navigate this field? Wow, the anti-financial-advisor propaganda is really working. I'm not a financial advisor and have no stake in this whatsoever - and I actually DIY my investing because I do know about the subject - but I'm constantly amazed at the irrational hate that financial advisors receive.

[Anonymous]

Not sure why people are being unhelpful to you. But I agree with you. I invest in an S&P 500 index fund and it’s up almost 26% since January 1, 2024. It would take some work to go back to October 2023 to check but my memory is the market was up the end of 2023 too. Thus, the increase going back a full 12 months is likely even more. So, agree, the increase they are quoting is worse than just putting money in a Vanguard S&P 500 index fund.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Returns are evaluated against a benchmark. If a large-cap growth and value fund, the relevant index might be something like the S&P 500.

It's more complicated than that, though, because you have to also consider volatility (risk). Sometimes funds with outsize returns achieve those by taking on more risk. Some investors are ok with that, others are oblivious.

Also be sure to compare returns after expenses. Vanguard funds have extremely low expenses compared to most others, which helps improve total return. See https://www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses

yes, that part I understand. 403b plans unfortunately are lousy with mostly high fee options, and Equitable's offerings are the worst offenders (charging something like 2% I think) which is why my colleague wants to change.

But I was specifically trying to put her "advisor's" comment into context for her. I don't think 21% growth this year is anything much to brag about, since I think just an index fund would have returned more than that over the past year.

So you don't even understand the most basic of basics regarding the stock market yet begrudge financial advisors' earning a living by helping others invest and navigate this field? Wow, the anti-financial-advisor propaganda is really working. I'm not a financial advisor and have no stake in this whatsoever - and I actually DIY my investing because I do know about the subject - but I'm constantly amazed at the irrational hate that financial advisors receive.

Ha ha ha, you are cute.

No, the Equitable "advisor" is not an actual financial advisor. They are salespeople. I know that much!

They do nothing to help teachers "navigate the field". They advise teachers to purchase very expensive, high fee funds. They are not fiduciary advisors.

I know enough to be able to search my school district's 403b offerings to find the one low fee fund option offered, but most teachers don't know, and no, the Equitable salespeople would never steer someone towards a low fee fund. They don't offer a low fee fund. They only offer high fee, and higher fee.

[Anonymous]

Anonymous wrote:Not sure why people are being unhelpful to you. But I agree with you. I invest in an S&P 500 index fund and it’s up almost 26% since January 1, 2024. It would take some work to go back to October 2023 to check but my memory is the market was up the end of 2023 too. Thus, the increase going back a full 12 months is likely even more. So, agree, the increase they are quoting is worse than just putting money in a Vanguard S&P 500 index fund.

Thanks.

[Anonymous]

Former teacher here. Equitable is the worst and their fees are high. Your friend should get out from them, even if they have to pay the early withdrawal fee.

[Anonymous]

Not your question, but I will add…these financial salespeople use that trick (I made you so much money) all the time. They are banking the person won’t know enough to check them, and they don’t care if they are wrong. It’s just a last-ditch tactic to get you to stay.

[Anonymous]

Remember that for retirement people usually invest in a 'balanced' or 'growth' portfolio-

For a 'growth' fund about 80% is in equities (a portion of this in international), 20% bonds - all for diversification purposes... therefore it wont have increased as much as sp500 (which is 100% usa stock) of course.

[Anonymous]

There is a segment in PBS frontline episode titled the Retirement Gamble that illustrates how a high expense ratio can really erode gains. Maybe have your friend watch that.

Also 21% is not that much. My YTD return of low expense index funds is 35%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Returns are evaluated against a benchmark. If a large-cap growth and value fund, the relevant index might be something like the S&P 500.

It's more complicated than that, though, because you have to also consider volatility (risk). Sometimes funds with outsize returns achieve those by taking on more risk. Some investors are ok with that, others are oblivious.

Also be sure to compare returns after expenses. Vanguard funds have extremely low expenses compared to most others, which helps improve total return. See https://www.investor.gov/introduction-investing/investing-basics/glossary/mutual-fund-fees-and-expenses

yes, that part I understand. 403b plans unfortunately are lousy with mostly high fee options, and Equitable's offerings are the worst offenders (charging something like 2% I think) which is why my colleague wants to change.

But I was specifically trying to put her "advisor's" comment into context for her. I don't think 21% growth this year is anything much to brag about, since I think just an index fund would have returned more than that over the past year.

So you don't even understand the most basic of basics regarding the stock market yet begrudge financial advisors' earning a living by helping others invest and navigate this field? Wow, the anti-financial-advisor propaganda is really working. I'm not a financial advisor and have no stake in this whatsoever - and I actually DIY my investing because I do know about the subject - but I'm constantly amazed at the irrational hate that financial advisors receive.

Ha ha ha, you are cute.

No, the Equitable "advisor" is not an actual financial advisor. They are salespeople. I know that much!

They do nothing to help teachers "navigate the field". They advise teachers to purchase very expensive, high fee funds. They are not fiduciary advisors.

I know enough to be able to search my school district's 403b offerings to find the one low fee fund option offered, but most teachers don't know, and no, the Equitable salespeople would never steer someone towards a low fee fund. They don't offer a low fee fund. They only offer high fee, and higher fee.

You know more you think! Your friend is lucky to have you. 2% is outrageous. Free advisor consult with Schwab. They’ll do the work of rolling over for free.

[Anonymous]

Voo (Vanguard top 500 company ETF) was $418 exactly a year ago and it's $545 today. Percentage change calculator shows us 30% return. Voo also has very small fee.
All companies holiday retirement funds are there to make money. Your friend needs to go minimum or nothing at all, and open a Roth IRA on her own which has $7k max a year ($8k max is she is turning 50 that year).
I hold stocks that go up 21% a day. Of course this is way too risky, but I learned all about investing by doing it myself.
You and your friend have not learned about stock market because there is someone doing it for you. It has never been easier to learn about market and investing on your own.
For starters, you friend should minimize 403B contributions to get her money away from them. Open Roth with Robinhood and Fidelity. Please no Vanguard. There website and app are horrible.
Robinhood even matches 3% if you sign up for gold membership which is so worth it. I turned my this years $7k into $30k in one year all tax free. This is the power of learning to invest on your own.
Buying and selling inside your Roth is tax free. I don't suggest you go crazy trying to chase the returns with growth stocks, but buying Voo is a good start. Voo does not need to be bought with Vanguard. All banks should allow it.
Please make sure you read Roth IRA rules and follow them and are eligible.
Max out Roth every year and learn how to invest on your own. Use couple of thousand dollars to buy growth stocks. Very hard to learn if you are not comfortable buying/selling stocks.
I started in 2020 being scared and having fidelity people on the phone with me to buying too many stocks to narrowing down to the few stocks I want to hold. It's a learning process and the $3000-$5000 you may use to learn all this will have a great return.
I was an aid in DCPS finishing up my own degree. I minimized the contribution and now my $400 is simply wasting away inside some Mission square retirement holding company. Luckily it's only $400, but I still have to deal with it in retirement. This would not be the case with Roth IRA as I have total control over it with low fees if I buy Voo and no fees if I pick my own companies.
Sorry for my English. My math is much better. If I could, I would get everyone out of 529 plans and 403b, 401k. All those companies are there to get piece of your money, and government is in on it giving some lousy tax break.
Nobody mentions that people learn absolutely nothing when retirement is done for them. The knowledge and confidence you get doing it on your own is be passed down to your kids. How do you even put a price on that.
Once you invest 3 years x $7k in Voo with Robinhood getting the 3% match if you become Gold member for $5 a month (soo worth it), you recognize that your money is being eaten away in 403b.
For the life of me I cannot explain to my own sister that I did 200%+ in two of my Roths this year because I learned how to do it. It can be done in any market - up or down. She yells over me how she needs the match and tax deduction.
The above is just for information. Please start with VOO on your own.