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I have a rollover account that is under performing. Is it a good idea to move it. Or ride it out?

Under advisement I moved it from a fidelity rollover to ivy funds about 5 years ago. My current 401 is with fidelity and performing well while this rollover account has lost money this year. Debating if I should roll it back to fidelity.

Aug 29, 2014 by Jennifer from Wyandotte, MI in  |  Flag
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3 votes

Jennifer,

Investing in an IRA is usually for the long-term. The performance of a fund may or may not match its benchmark in the short run. The question is how has the manager and the fund done over the long run net of fees. By net of fees I mean what is the performance after you've paid the fees. And when you are comparing funds, make sure you are comparing apples with apples. An equity growth fund may have done quite well this year while an energy fund may not. So it may not be the fund family which is the issue, but which fund within the family you have chosen.

And of course, its not always the upside comparison which is important. You might benefit much more from a fund which goes down less when there is a market downturn than one which goes up more when the market is going up. Today, we have pretty much been having a non-stop bull market since 2009. I always like to look not only how my funds have done in the last 5 years, but how they did in 2008 when the market went down 40%.

All that being said, an independent financial advisor can help you choose the right funds no matter what family they are in. The right asset allocation to match your risk tolerance, risk capacity, and goals is much more important than the specific funds. Fidelity has some good mutual funds. I am not specifically familiar with any Ivy funds, but there may be good funds there too. Switching because you get a better match to your situation over the long term is the decision to make, not switching because you got underperformance for 6 months.

Comment   |  Flag   |  Sep 04, 2014

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3 votes

It's hard to imagine a fund losing money over the past five years, so I'm wondering what Ivy Fund you have the money invested in at this time. It's an interesting question overall because underperforming can have different meanings (i.e.- underperforming against its peer funds, other investments, the stock market, etc.) The fact that it lost money is obviously not good, but it could depend on which asset category you have it invested in at this time. It's important when picking funds to not only closely examine cost and net performance against all fees, but make certain you have set your own proper expectations around performance. Can you fill in more details?

Comment   |  Flag   |  Sep 07, 2014 from Alpharetta, GA

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Layton Jacob Cox Level 11

I'm not a big fan of Ivy Funds, but that is neither here nor there.

If I was you I would do some really quick fee analysis. What does the 401(k) cost and what does the Ivy Funds cost? No matter where you are, you will be able to under- or out- perform the market. You never know which one you will be before, but those are your only two options.

If the change makes your life easier and there isn't a large difference in fees, then go for it. If the Ivy Funds is significantly cheaper, then stay and ride it out. Always remember that performance is not the only number you should be looking at, fees play a large part as well.

Comment   |  Flag   |  Aug 29, 2014 from Tucson, AZ

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The simplest answer may be to check your choice of Ivy Funds. Ivy Balanced Fund, for example, is rated 4 stars out of 5 by Morningstar and it is in the top quartile of performance compared to its peers for the past 5 years. The expense ratio of 1.15% is higher than I like, as Layton mentioned, but many Fidelity funds have the same type of expenses. Check your fund choices on Morningstar.com, for ratings and % rank in category.

Comment   |  Flag   |  Sep 01, 2014 from Cincinnati, OH

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John Schoolman Level 12

Jennifer, the only way to measure a fund's performance is against its appropriate benchmark. You mentioned that your Fidelity funds have performed well and your Ivy has not, but relative to what? For example, a blended Large Cap Fund can be measured against the S&P 500, for example. Your Fidelity funds may be performing poorly relative to their benchmarks. John

Comment   |  Flag   |  Sep 09, 2014 from Kalamazoo Township, MI

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Peter Cacioppo Level 16

Ivy has more than 30 funds to choose and thus like any other fund company will show differences in performance. For instance a short term bond fund will not perform as well as a mid cap fund in a stock bull market like we have had over the last 5 years. Fidelity has hundreds of their own and give you access to thousands of others. Same idea there when you talk performance. You need to find a local fee only advisor and pick their brains in-depth.

Comment   |  Flag   |  Sep 01, 2014 from La Jolla, CA

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Jennifer, Why don't you check out funds from Dodge & Cox (www.dodgeandcox.com)? Long history, low expenses, and the level of expertise you will gain over both Ivy and the retail giant Fidelity will be fairly significant. Dodge and Cox is a highly disciplined investment firm that offers excellent options. When you buy a fund you are really buying the investment manager's process (which should demonstrate some degree of consistency over time). Understanding this process is much more important than comparing recent returns. Remember, those returns are in the past and will be of no help to you going forward. The process is what will increase the likelihood of replicating past success. Hope that helps.

Comment   |  Flag   |  Sep 04, 2014 from Knoxville, TN

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