Why is my Ellevest account not performing as well as other accounts?

Why is my Ellevest account not performing as well as other accounts?

If you’re comparing your Ellevest portfolio with another portfolio, you want to make sure that the two are similarly constructed. A portfolio’s investments and how much you own of each investment can be very different from one portfolio to the next, so you want to make sure that you’re comparing apples to apples. 

You can find instructions to view what investments are included in your portfolio here. 

Ellevest’s portfolios are built to be diversified and tailored to your specific goals and timeline. We take a goals-based approach to investing which can't be compared to a single index, like the S&P 500, because our portfolios will almost always be more diversified so that the portfolio’s risk matches your goal. Read more about that here! 

Why does my high-yield savings account have better returns than my investment account? 

High-yield savings accounts offer set interest rates, which are predictable and not subject to market performance risk. Investment portfolios, on the other hand, are subject to market performance risk, and while returns can be higher than what is offered by savings accounts the returns are unknown and volatile. 

It’s possible for returns to be low or even negative. That is why we always suggest investing for the long term, which will smooth out the volatility and provide returns that compensate investors for taking on risk.

High-yield savings accounts and other investment vehicles are completely different products and not a direct comparison to your investment account with Ellevest. A high-yield savings account is a type of savings account that offers a higher interest rate than a traditional savings account. An investment portfolio is a collection of investments, such as stocks, bonds, and mutual funds. High-yield savings accounts are typically less risky than investment portfolios, but they also typically offer lower returns. Investment portfolios may offer higher returns in the long run, but they also carry more risk. 

Why is my portfolio not performing the same as the market or the S&P 500?

When you see in the news that the market is ‘up’ or ‘down’, like the S&P 500 or Dow Jones, there are a few reasons why your portfolio at Ellevest may not be matching these individual indexes. These indices only reflect what is happening in a small corner of the “market.” Ellevest’s portfolios are highly diversified to include up to 20 different assets, including US, International, REITs, bonds, and even some cash. Each of these assets can do something different, but collectively they lower a portfolio’s level of risk. So if you’re ever curious about how your portfolio compares to the “market” you need to look at a lot more than just one index. Here are some tips for navigating a volatile market.

These are market-weighted indexes, which means that the largest companies in the index have a greater impact on its performance. Your portfolio at Ellevest is weighted differently, with a larger diversification of assets, which could lead to different returns. At Ellevest, we take a goals-based approach with our portfolios, which includes diversification meant to help you have a better chance of hitting your investing goal within your chosen timeline when you follow the recommended contributions. 

Why do I not see larger returns in my investment portfolio?

Your returns are closely related to the level of risk in your portfolio. In general, Ellevest recommends goals with shorter time horizons to have less risk than portfolios with longer horizons. Additionally, the goal that you are invested in will affect your portfolio’s level of risk. The more important a investing goal is to you, the less risk we recommend. For instance, if you are saving to buy a house with our Home goal, you probably don’t want as much risk as someone who has a Splurge goal with the intention of taking a dream vacation in two years. Buying that forever home is more important than taking a vacation, so we offer less risk for the Home goal. 

If you’re not seeing the higher returns that you’d like with your Ellevest account, it may be because of inconsistent contributions or the level of expectations of a goals-based investing approach. Goals-based investing includes a larger diversification within your portfolio. With diversification of assets, you may be taking on less risk, but with lower risk comes lower returns. This is why it’s important to stay the course and not try to time the markets — even in a down market, it may be a good time to invest and to stay consistent in order to stay on track for meeting your goals. We simulate hundreds of market scenarios to find an outcome with at least a 70% probability of reaching your investing goal.

Staying on track and reaching your goals is important. With goals-based investing, it’s important to stay as consistent as possible with your deposits to increase the likelihood of reaching your goal within your designated time horizon. If you’re off track, it may be time to adjust your goals. You can find out more about keeping on track with your goals here.