Anatomy of an IRA: The last four years

When I began writing the It's Only Money column, during the throes of the financial crisis, I surveyed the most authoritative research on investing I could find. I wanted to offer readers reliable, impartial guidance on managing their money.

Within a year, I arrived at a simple maxim I've been harping on ever since: The most important way you can improve long-term investment results is to keep costs low.

In early 2010, I took my own advice. I moved an IRA I'd had since 1996 from TD Ameritrade over to Vanguard. I liquidated its three actively managed funds and invested that money in lower-cost Vanguard funds.

Four years later, the outcome isn't black and white. But I'll tell you why I think I made the right move. See if you agree.

Last week, I wrote about the origin and record of that old IRA. It grew at an annualized clip of 6.9 percent. My $8,900 in contributions over nearly 14 years and two sharp downturns more than doubled in value to $19,500 by early 2010.

But it left a lot to be desired. Two of its three mutual funds underperformed severely. The stock funds were highly volatile but generated bond-like returns. One of them was used in a fund-timing scandal, federal regulators say, which probably cost me money.

Those disappointments and my $40 annual custodial fee drove me to transfer all of it to Vanguard. This time, I picked the funds myself.

I figured that since I'll draw money from this tax free, and that a much larger sum of my retirement savings are in index funds in other accounts, I would be a bit more daring with my Roth. I picked a few actively managed Vanguard mutual funds and Exchange Traded Funds rather than all pure passively managed index funds. Yet all cost less than 0.30 percent a year.

As of June 30 of this year, my Roth was worth $32,700, having gained $13,300 since my February 2010 transfer. That total includes a $2,160 contribution in 2010. Its annualized return is 9.9 percent, according to my estimates.

I've also tracked how my old IRA would have performed if I'd never touched it, using Morningstar's portfolio tools.

See more here:
Anatomy of an IRA: The last four years