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."
Your investment is probably in a Collective Investment Trust. These are not mutual funds, and are not publicly traded. I.e. they are private to plan participants in your company. Because of this, they are not required* to distribute dividends like mutual funds. Instead, they will reinvest dividends automatically, increasing the value of the fund, rather than number of shares, as with dividend reinvestment. Sine you mention the S&P 500 fund you have tracks closely to the S&P Index, keep in mind there's two indexes you could be looking at: Without any new contributions, your fund should closely track the Total Return version for periods 3 months or longer, minus the expense ratio. If you are adding contributions to the fund, you can't just look at the start and end balances. The comparison is trickier and you'll need to use the Internal Rate of Return (look into the XIRR function in Excel/Google Sheets). *MFs are not strictly required to pay dividends, but are strongly tax-incentivized to do so, and essentially all do. I think it's great idea.  Many large brokerages give customers access to a pretty sizable list of zero commission, zero load funds.  In this list of funds will certainly be an S&P 500 index.  So you can open your account for free, deposit your $1,000 for free and invest it in an S&P index for no cost.  You'll pay a very negligible amount in annual expense fees and you'll owe taxes on your gain if you have to use the money.  I don't follow the school of thought that all investment money should be in retirement account jail. But I think if you have your spending under control, you have your other finances in order and just want to place money somewhere, you're on the right track with this idea. This is the exactly wrong thing to do especially in the age of algorithmic trading.  Consider this event from 2010:  Chart Source  Another similar event occurred in 2015 and there was also a currency flash crash in that year. As you can see the S&P 500 (and basically the entire market) dropped nearly 7% in a matter of minutes.  It regained most of that value within 15 minutes. If you are tempted to think that 7% isn't that big of a deal, you need to understand that specific securities will have a much bigger drop during such events.  For example the PowerShares S&P 500 Low Volatility ETF (SPLV) was down 45% at one point on Aug 24, 2015 but closed less than 6% down. Consider what effect a stop loss order would have on your portfolio in that circumstance.  You would not be able to react fast enough to buy at the bottom.  The advantage of long-term investing is that you are immune to such aberrations. Additionally, as asked by others, what do you do once you've pulled out your money.  Do you wait for a big jump in the market and hop back in?  The risk here is that you are on the sidelines for the gains.  By missing out on just a small number of big days, you can really hurt your long-term returns. "Your bank's fund is not an index fund.  From your link: To provide a balanced portfolio of primarily Canadian securities that produce income and capital appreciation by investing primarily in Canadian money market instruments, debt securities and common and preferred shares. This is a very broad actively managed fund.  Compare this to the investment objective listed for Vanguard's VOO: Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies. There are loads of market indices with varying formulas that are supposed to track the performance of a market or market segment that they intend to track.  The Russel 2000, The Wilshire 1000, The S&P 500, the Dow Industrial Average, there is even the SSGA Gender Diversity Index.  Some body comes up with a market index.  An ""Index Fund"" is simply a Mutual Fund or Exchange Traded Fund (ETF) that uses a market index formula to make it's investment decisions enabling an investor to track the performance of the index without having to buy and sell the constituent securities on their own.  These ""index funds"" are able to charge lower fees because they spend $0 on research, and only make investment decisions in order to track the holdings of the index. I think 1.2% is too high, but I'm coming from the US investing world it might not be that high compared to Canadian offerings.  Additionally, comparing this fund's expense ratio to the Vanguard 500 or Total Market index fund is nonsensical. Similarly, comparing the investment returns is nonsensical because one tracks the S&P 500 and one does not, nor does it seek to (as an example the #5 largest holding of the CIBC fund is a Government of Canada 2045 3.5% bond). Everyone should diversify their holdings and adjust their investment allocations as they age.  As you age you should be reallocating away from highly volatile common stock and in to assets classes that are historically more stable/less volatile like national government debt and high grade corporate/local government debt.  This fund is already diversified in to some debt instruments, depending on your age and other asset allocations this might not be the best place to put your money regardless of the fees. Personally, I handle my own asset allocations and I'm split between Large, Mid and Small cap low-fee index funds, and the lowest cost high grade debt funds available to me." "There are a couple of misconceptions I think are present here: Firstly, when people say ""interest"", usually that implies a lower-risk investment, like a government bond or a money market fund. Some interest-earning investments can be higher risk (like junk bonds offered by near-bankrupt companies), but for the most part, stocks are higher risk. With higher risk comes higher reward, but obviously also the chance for a bad year. A ""bad year"" can mean your fund actually goes down in value, because the companies you are invested in do poorly. So calling all value increases ""interest"" is not the correct way to think about things. Secondly, remember that ""Roth IRA fund"" doesn't really tell you what's ""inside"" it. You could set up your fund to include only low-risk interest earning investments, or higher risk foreign stocks. From what you've said, your fund is a ""target retirement date""-type fund. This typically means that it is a mix of stocks and bonds, weighted higher to bonds if you are older (on the theory of minimizing risk near retirement), and higher to stocks if you are younger (on the theory of accepting risk for higher average returns when you have time to overcome losses). What this means is that assuming you're young and the fund you have is typical, you probably have ~50%+ of your money invested in stocks. Stocks don't pay interest, they give you value in two ways: they pay you dividends, and the companies that they are a share of increase in value (remember that a stock is literally a small % ownership of the company). So the value increase you see as the increase due to the increase in the mutual fund's share price, is part of the total ""interest"" amount you were expecting. Finally, if you are reading about ""standard growth"" of an account using a given amount of contributions, someone somewhere is making an assumption about how much ""growth"" actually happens. Either you entered a number in the calculator (""How much do you expect growth to be per year?"") or it made an assumption by default (probably something like 7% growth per year - I haven't checked the math on your number to see what the growth rate they used was). These types of assumptions can be helpful for general retirement planning, but they are not ""rules"" that your investments are required by law to follow. If you invest in something with risk, your return may be less than expected." Just get out. If the investment isn't going up, you are losing money to inflation, as well as the opportunity cost of not having the money somewhere more profitable. These things happen to the best of us. Just learn from it and move on. Some valuable lessons: Just keep trying. Mistakes like this are all part of the learning process. Best of luck. This is Ellie Lan, investment analyst at Betterment. To answer your question, American investors are drawn to use the S&P 500 (SPY) as a benchmark to measure the performance of Betterment portfolios, particularly because it’s familiar and it’s the index always reported in the news. However, going all in to invest in SPY is not a good investment strategy—and even using it to compare your own diversified investments is misleading. We outline some of the pitfalls of this approach in this article: Why the S&P 500 Is a Bad Benchmark. An “algo-advisor” service like Betterment is a preferable approach and provides a number of advantages over simply investing in ETFs (SPY or others like VOO or IVV) that track the S&P 500.  So, why invest with Betterment rather than in the S&P 500? Let’s first look at the issue of diversification. SPY only exposes investors to stocks in the U.S. large cap market. This may feel acceptable because of home bias, which is the tendency to invest disproportionately in domestic equities relative to foreign equities, regardless of their home country.  However, investing in one geography and one asset class is riskier than global diversification because inflation risk, exchange-rate risk, and interest-rate risk will likely affect all U.S. stocks to a similar degree in the event of a U.S. downturn. In contrast, a well-diversified portfolio invests in a balance between bonds and stocks, and the ratio of bonds to stocks is dependent upon the investment horizon as well as the individual's goals.  By constructing a portfolio from stock and bond ETFs across the world, Betterment reduces your portfolio’s sensitivity to swings. And the diversification goes beyond mere asset class and geography. For example, Betterment’s basket of bond ETFs have varying durations (e.g., short-term Treasuries have an effective duration of less than six months vs. U.S. corporate bonds, which have an effective duration of just more than 8 years) and credit quality. The level of diversification further helps you manage risk.  Dan Egan, Betterment’s Director of Behavioral Finance and Investing, examined the increase in returns by moving from a U.S.-only portfolio to a globally diversified portfolio. On a risk-adjusted basis, the Betterment portfolio has historically outperformed a simple DIY investor portfolio by as much as 1.8% per year, attributed solely to diversification.   Now, let’s assume that the investor at hand (Investor A) is a sophisticated investor who understands the importance of diversification. Additionally, let’s assume that he understands the optimal allocation for his age, risk appetite, and investment horizon. Investor A will still benefit from investing with Betterment.  Automating his portfolio management with Betterment helps to insulate Investor A from the ’behavior gap,’ or the tendency for investors to sacrifice returns due to bad timing. Studies show that individual investors lose, on average, anywhere between 1.2% to 4.3% due to the behavior gap, and this gap can be as high as 6.5% for the most active investors. Compared to the average investor, Betterment customers have a behavior gap that is 1.25% lower. How? Betterment has implemented smart design to discourage market timing and short-sighted decision making.  For example, Betterment’s Tax Impact Preview feature allows users to view the tax hit of a withdrawal or allocation change before a decision is made. Currently, Betterment is the only automated investment service to offer this capability. This function allows you to see a detailed estimate of the expected gains or losses broken down by short- and long-term, making it possible for investors to make better decisions about whether short-term gains should be deferred to the long-term. Now, for the sake of comparison, let’s assume that we have an even more sophisticated investor (Investor B), who understands the pitfalls of the behavior gap and is somehow able to avoid it. Betterment is still a better tool for Investor B because it offers a suite of tax-efficient features, including tax loss harvesting, smarter cost-basis accounting, municipal bonds, smart dividend reinvesting, and more. Each of these strategies can be automatically deployed inside the portfolio—Investor B need not do a thing. Each of these strategies can boost returns by lowering tax exposure. To return to your initial question—why not simply invest in the S&P 500? Investing is a long-term proposition, particularly when saving for retirement or other goals with a time horizon of several decades. To be a successful long-term investor means employing the core principles of diversification, tax management, and behavior management. While the S&P might look like a ‘hot’ investment one year, there are always reversals of fortune. The goal with long-term passive investing—the kind of investing that Betterment offers—is to help you reach your investing goals as efficiently as possible.   Lastly, Betterment offers best-in-industry advice about where to save and how much to save for no fee. Yes, it depends on the fund it's trying to mirror.  The ETF for the S&P that's best known (in my opinion) is SPY and you see the breakdown of its holdings.  Clearly, it's not an equal weighted index.