Anyone lose money in Roth?

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Anyone lose money in Roth?

Postby bogleblitz » Thu Dec 27, 2012 11:50 am

This year 2012 is the first year I started a Roth account. I was wondering if anyone here has ever lost money in Roth account.

My story:
I actually lost money in 401k my 1st year right out of college at 21 years old in 1999. The tech bubble was booming and I was hearing everyone was buying stock. I use my 401k to buy 100% company stock. I was also buying stock in after tax money in etrade account. Then I lost more than 50% of my 401k and etrade. I switch jobs after 1 year and lost confidence in the stock market. 401k balance was low so it required me to transfer or cash out. I cashed out with 10% fee.

I avoided 401k completely for another 6 years and only returned back at 27 years old.
Still no clue what to buy in 401k, i randomly picked Fidelity contrafunds, small caps, internationals and contribute 10%. I did not login and look at my 401k for the next 7 years because I had no confidence or no knowledge about it. I login this year to see how much I accumulated and notice I finally saved something. My overall gain seems to be 0% though. I think I did not lose or gain any money from my 401k for the past 7 years. After reading some investment books, I have rebalanced my 401k, start to max out 401k this year, and started a roth. Hopefully my 401k and roth will turn positive in the future.

Edit and updated:
The 4 funds in my 401k for the past 7 years from July/2005

25% TRVLX - T. Rowe Price Value 0.85%ER
25% FCNKX - Fidelity Contrafund K 0.69%ER
25% FSLCX - Fidelity Small Cap Stock 1.12%ER
25% RERGX - American Funds EuroPacific Gr R6 0.50%ER
Last edited by bogleblitz on Thu Dec 27, 2012 2:38 pm, edited 2 times in total.
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Re: Anyone lose money in Roth?

Postby NYBoglehead » Thu Dec 27, 2012 11:57 am

I guarantee that your return is better than 0% over the last 7 years. The beauty of 401ks is semi-monthly contributions, so you are buying both the peaks and valleys. The S&P 500 has more than doubled since its 2009 low, dividends alone should have provided ~2% growth annually aside from any price appreciation. I think you should make the best attempt to have your 401k mirror the 3-fund portfolio and enjoy the ride, over time you will accumulate far more in the market than you would be able to save on your own in a savings account.

Since I stated investing in 2006, my Roth IRA has gone up and gone down, but I have seen a positive cumulative return and over time expect a positive cumulative return. I look at years when the market is down as opportunities to buy more shares on the cheap. My quarterly re-investment of dividends purchases shares when the market is up and when the market is down. 35 years from now when I start selling shares the daily fluctuations of the market will have had a minimal effect on my portfolio.
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Re: Anyone lose money in Roth?

Postby dailybagel » Thu Dec 27, 2012 12:22 pm

I have a Roth IRA, and made investments in 2005, then started contributing regularly in 2007.

My cumulative gains were negative in 2007-09. I was investing in a Target Date fund and it was 90% stocks.

I continued investing the same amount every month. I was comfortable with this because (a) I had a plan, and (b) I knew my investment choices were appropriate for my goals, namely, retirement in the 2040s.

I would suggest you articulate your goals for this money, then formulate a plan. You can do that after learning a bit on this site, for example, and posting for help.

Once you do that, you'll have a lot more confidence and comfort with what you're doing.
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Re: Anyone lose money in Roth?

Postby JamesSFO » Thu Dec 27, 2012 12:34 pm

Lots of people lose money in Roth accounts and 401Ks from time to time. I have often made contributions and then seen the price drop, the real question is what happens not over 1 week, 1 month, or 1 year, but over the lifetime of investing. For that, I'm overall in the black.
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Re: Anyone lose money in Roth?

Postby pkcrafter » Thu Dec 27, 2012 12:56 pm

bogleblitz, thanks for sharing your story--it's one every new investor should read. You have made some serious mistakes, but the good part is you are now getting on the right track. And of course you are going to lose money from time to time, that's just part of long term investing. Continue learning and spend time on understanding the nature of risk.

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Re: Anyone lose money in Roth?

Postby nisiprius » Thu Dec 27, 2012 1:22 pm

bogleblitz wrote:Still no clue what to buy in 401k, i randomly picked Fidelity contrafunds, small caps, internationals and contribute 10%. I did not login and look at my 401k for the next 7 years because I had no confidence or no knowledge about it. I login this year to see how much I accumulated and notice I finally saved something. My overall gain seems to be 0% though. I think I did not lose or gain any money from my 401k for the past 7 years.
I don't understand this, and I think you should consider digging out your old statements or asking them to retrieve them for you and figure out what's going on. Actually, I would call whatever phone number you have for Fidelity's 401(k) retirement services and say "I would like help in figuring out what my personal rate of return on my 401(k) was for the last seven years," and stick with it until you understand.

I think you probably goofed somewhere on your math. Did you use the actual total numbers from your account balance?

7 years ago would be around the end of 2005. You don't say exactly which funds you invested in, but:

$10,000 invested in Fidelity Contrafund (FCNTX) then would be $14,594 today
$10,000 invested in Fidelity Small Cap Stock (FSLCX) would be $13,065 today
$10,000 invested in Fidelity Diversified International (FDIVX) then would be $11,522

In other words, all three of those funds made money over the last seven years.

Image

A portfolio of equal amounts of each, just left to sit without rebalancing, would have grown $30,000 to $39,181 which works out to an average of 3.9% per year, which is not what you hope for from stocks but not terrible and certainly not zero.

Furthermore, if you were making regular contributions over that whole time, during the awful crash of 2008-2009 you would have been buying at low prices and you should have done quite well.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Anyone lose money in Roth?

Postby livesoft » Thu Dec 27, 2012 1:35 pm

I think I have lost money in every account that I have ever had post high school including my Roth IRA. I wouldn't be investing if I didn't have losses.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Anyone lose money in Roth?

Postby bogleblitz » Thu Dec 27, 2012 2:36 pm

The 4 funds in my 401k for the past 7 years from 2005 July is:

25% TRVLX - T. Rowe Price Value 0.85%ER
25% FCNKX - Fidelity Contrafund K 0.69%ER
25% FSLCX - Fidelity Small Cap Stock 1.12%ER
25% RERGX - American Funds EuroPacific Gr R6 0.50%ER

I randomly picked them like a monkey thowing darts and not knowing anything about them.
Maybe I did make some money, i'm not sure. Adding my own contributions and company matching seems to be similar to the total I have. I can only look up performance for the past 2 years in 401k. I threw away the yearly statements they sent me. I wish I kept them.

For 2011, it shows i have -9.0%
For 2012, it shows i have +14.%

I have sold all 4 of the above funds, and bought something better with lower expense ratios.

I redid some calculations and I was calculating everything up until last year 12/31/2011. I'm pretty close to zero gain and zero lost last year. this year 2012 has been very good with 14% so I am up a little bit total.
Last edited by bogleblitz on Thu Dec 27, 2012 5:11 pm, edited 1 time in total.
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Re: Anyone lose money in Roth?

Postby Default User BR » Thu Dec 27, 2012 5:00 pm

In 2007, my Roth was switched to 100% VNQ. I believe the value of it dropped a smidge [1] over the next couple years.


Brian

1. If you consider a minor 60% decline worth considering.
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Re: Anyone lose money in Roth?

Postby caroljm36 » Thu Dec 27, 2012 9:39 pm

I don't see what "Roth" has to do with this. This could be about any kind of investment account, retirement, Roth or taxable. YMMV
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Re: Anyone lose money in Roth?

Postby haban01 » Thu Dec 27, 2012 11:04 pm

I have a hard time also believing that your return was -zero-. Don't you have a running track of your annual contributions (including) match). That should help you better see if you really ended up at zero.
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Re: Anyone lose money in Roth?

Postby lloydbraun » Thu Dec 27, 2012 11:09 pm

I agree with a previous poster that this could be rephrased, "Have you ever lost money in an account?" There's no reason why you would lose money in a Roth vs. any other kind of account. In fact you'd be less likely to lose money in a Roth because of the tax implications in taxable accounts. I know that I lost money today in 403B as the market went down but I'm confident that it will be back and then some by 2045.
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Re: Anyone lose money in Roth?

Postby FNK » Fri Dec 28, 2012 12:22 am

I wonder... what's wrong with all of us and investing? OP's story is far from unique. It's more like we all start out in some weird obtuse state where we have the urge to do something about investing, but unlike our other pursuits (that get us the investable money in the first place), we make sure to avoid all education and sanity. It's a rare few that stumble here.
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Re: Anyone lose money in Roth?

Postby bogleblitz » Fri Dec 28, 2012 3:00 am

FNK wrote:I wonder... what's wrong with all of us and investing? OP's story is far from unique. It's more like we all start out in some weird obtuse state


My story is not unique, it is the norm. I read a forbes article that people graduating from 1999-2009 have a harder time believing in the stock market/401k.
http://www.forbes.com/sites/financialfi ... ut-it-can/

All my college friends and relative bought stock, so I bought as well. I think all my friends lost money eventually. I tried reading Money magazine with "10 hottest stock" or "10 hottest mutual funds".
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Re: Anyone lose money in Roth?

Postby letsgobobby » Fri Dec 28, 2012 4:39 am

I also jumped on the stock boom of the late 90s, I had $7k in cash in a Roth IRA and with all my taxable savings bought $500 each of 3 stocks - FOSL (Fossil apparel), ROST (Ross stores), and TGLO (The Globe.com). Eventually 2 of 3 made a little money, and one lost 95%. I think you can guess which was which. I feel fortunate that my stock picking lesson came early and cheaply.
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Re: Anyone lose money in Roth?

Postby MathWizard » Fri Dec 28, 2012 6:47 am

Yes. I started my ROTH in 2000, and in 2008-2009 had less money in it that I had contributed.
It was hard to convince my wife that it was precisely the time to be putting money in.
Increased cost due to my eldest startin college in fall 2008 didn't help the cause.

I have contributed during the down times as well as the good, which helped me
attain a average 5.2% annual ROI in my ROTH.
This during a period which included 3 recessions. (2001,2003,2008)
I expect better returns in the future.

Stay the course was tough to do in 2008/2009 but it pays off.
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Re: Anyone lose money in Roth?

Postby englishgirl » Fri Dec 28, 2012 11:47 am

bogleblitz wrote:
FNK wrote:I wonder... what's wrong with all of us and investing? OP's story is far from unique. It's more like we all start out in some weird obtuse state


My story is not unique, it is the norm. ...All my college friends and relative bought stock, so I bought as well. I think all my friends lost money eventually. I tried reading Money magazine with "10 hottest stock" or "10 hottest mutual funds".


Yeah, that's what FNK is saying - your experience IS the norm. I think many of us here started out with a similar weird random mixture of stuff before we finally said "wait...I should educate myself a bit and figure out what I'm doing."

Roth or 401k are just buckets that you throw money in. They are just wrappers, if you will, and the name of the account does not make any difference towards whether you'll lose money or not. What matters is the funds that you buy that go in the wrappers. What you need to do is start reading the Wiki and some of the recommended books so you can understand what you need to do. It's not hard, but it does take an investment of a few hours of time to educate yourself.
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