Why does the value of my Roth IRA keep going down?

[Guest Barb Hokel]

Why is my ROTH IRA Contributory Account going backwards? I have contributed a total of $2000 for three years, which SHOULD add up to $6,000 Plus Interest and it's only valued at about $5600 today.

How do I get it out of control of the stockbroker and back into the control of someone who will make it GROW! After all, the purpose is to RETIRE, not put money into a sinking fund!

Thanks!

[Guest ERISAweasel]

"Why is my ROTH IRA Contributory Account going backwards? I have contributed a total of $2000 for three years, which SHOULD add up to $6,000 Plus Interest and it's only valued at about $5600 today."

Gee, that's a good question. If I were you, I'd sue your broker. Really. I mean, look at what Nortel Networks (ticker symbol: NT) did today -- if I'd have purchased $6,000 of NT at yesterday's closing price, it would only be worth around $4,200 today! This is outrageous! I don't buy a stock expecting it's value will drop! Does Congress know about this??

Of course, I am being facetious.

Could it be that when you purchase equities during an overvalued market you risk losing money? Are you sure you understand the difference between a bank account and a brokerage account?

Maybe you should consider purchasing annuities, instead.

Just wait until you are allowed to put a portion of your Social Security account in the market!

[Guest Barb Hokel]

Seriously ErisaWeasel. I am not interested in following stocks - I just want my money to grow for me - which is why I invested with a Professional Stockbroker. HA! That's been a joke! How do I get the money away from her and put it with someone else? It IS my Roth. I just don't really trust that this person really cares about my $$$ as long as she gets her commissions.

[Guest ERISAweasel]

As with any profession, all it takes to become a Professional Anything is some schooling (maybe) and being able to pass the tests necessary for accreditation. Simply being accredited unfortunately doesn't mean that you are competent. There are great financial planning professionals (brokers, planners, CLU's, CFA's, etc.) and there are poor ones... whether your broker is good or bad, it definitely sounds like he's not meeting your expectations.

Step one might be to ask him/her why your account hasn't grown as much as you've expected it to. If you don't like the answer, you can (generally) move your account elsewhere.

Interview several financial planners, tell them about your recent experience, tell them what your goals and needs are (i.e. you don't want to lose $, and you don't want to become a stock-watcher). Get their advice, go with the one you're most comfortable with. The planner should be able to assist you in changing to a new broker.

[John G]

Stock markets go up and down. So, in any given short period of time (and 3 yrs is a short period) you can have a negative result. But over decades, the number of good years outnumber the number of bad years by anywhere from 5:1 to 10:1 and the best years are much better than the worse years are bad (in percent terms). And, a "professional" can not guarentee all good years or even that they will beat the average.

It sounds from your post that you are new to investing and have passed the responsibility to another... the "pro". That was a common mistake. Only you can truely be responsible for your investments, it is your money and the results are your results. Even if you have someone helping you, you MUST know about what choices are made, the reasons for those choices, and the risk exposure.

You should have a series of monthly or quarterly statements that you should examine. What do you own? Mutual funds? Tech stocks? You should know the names and their area of business. Next, set up an appointment with your advisor and review the current holdings and activity. Your advisor should have a chance to explain what they did.

If your money was with this person for three years, I would normally expect a modest gain from the first two years and some hemoraging this year. The net might be a slight positive, but that would highly depend upon what they purchased. There are plenty of big "safe" stocks like Dupont, Lucent and ATT that have dropped more than 50% in the last year.

If you see a lot of buying and selling in your account, then your "pro" might be churning your account to generate commissions... but at 6K in assets, that does not seem likely. Generally an account this size is more likely to be overlooked or ignored rather than actively managed.

If you reach the conclusion you wish to move your IRA account, the procedure is relatively straight forward. Find the next home (brokerage, mutual fund, bank, etc.) and ask for an IRA transfer application. Their customer service staff can help you with the details. Then, the new custodian will send the paperwork to your existing custodian requesting the account be released. Often this takes less than 3 weeks, but you must monitor the transaction to insure the paperwork doesn't get "lost". You may want to consider parking the assets in a broad based index fund such as the Vanguard S&P 500 which holds 500 very large firms and has very low annual costs. With this you would virtually guarentee that you would get performance essentially identical to the S&P500 index... in other words you would neither beat nor lose to the overall market but be the average. This kind of investment is the opposite of individual stock picking, instead you are broadly picking a wide range of big firms.

I will give you an opinion on your holdings if you email me the dates, holdings and rough percents/amounts.

[Guest BrianfromWash]

My question for Barb is:

How much time do you have before you'll need that IRA? If you've still got a lot of years left, I'd say* shrug it off and keep contributing. When you buy shares at all different price levels, it benefits you over the long run (and that's what you should be focusing on..THE LONG RUN).

Let's say you're 25, and are paid twice a month. You want to retire on the money in your IRA when you're 65, in 40 years. Every paycheck, you make a contribution, for a total of 24 contributions of X amount of dollars per year (assuming you're paid twice a month). Let's say that is the only time you make a contribution, and you never change that contribution over the entire 40 years. That means you'll make 960 more contributions over the term of your life, before deciding to use that IRA. Plus, you're buying in all at sorts of different prices. If you own stock, you're not going to buy it all at one price over 40 years..the price will go up, go down. But you'll own that stock at all those different price levels.

The best way I've heard the market talked about (if that is what your IRA is in) is like a boy walking up a hill with a yo-yo. You notice the fluctuations of the yo-yo, but forget to notice the hill (the longterm growth overall). The value of stocks will fluctuate up and down in short periods of time, but when they're riding along with the market, the overall trend will go up. If you have an especially aggressive portfolio, you have to prepare to possibly see declines.

*Note: I'm not a financial professional.