How's Your 401k Doing?
- Thread starter Preacher Franklin
- Start date
This thread made me look at my accounts. My time horizon is not short so I don't check in much except to invest. My brokerage account (Very Agressive), that I manage, is down 17.9% over the last year. I continue to invest at a regular rate and have for a long time. If I had tried to time the market over the life of the account, by moving in and out of cash every time things got shaky, I would most likely have missed out on returns. It's practically impossible. The guy who brags about timing the market right is dishonest, or just got lucky, or is only telling you about the time that it did work out and not the times it didn't.
17.9% looks bad over the last year. However, my 10-year return on that same account: 17.88%. I've gained way more by fundamental investing and dollar cost averaging than I ever would have with a short term reactive strategy.
A little more data:
- IRA that I do not manage (Investment Adviser). Aggressive. Down 17%.
- Company 401k that I get to pick from a few "strategies" is down 26%. The one I have practically zero control over who does the investing is the crappiest by far. I'm REALLY counting on dollar cost averaging on this one...
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When you start investing in a market cycle makes a much bigger difference than I think most people realize. Saving 30% of your income starting in 1941 for example, would have let you be financially independent after just 16 years. Saving 30% of your income starting in 1951 would have required you save for about 33 years. Similarly, saving 30% starting in ~1984 would have let you be financially indepedent in 16 years. Save 30% starting in 1990 and it would have taken almost 25 years. These numbers are with 100% stock portfolios but while changing allocation over time should reduce variability if you are measuring from the last five years, it could make things worse if you look at time from the start of savings because you could miss out on market returns that you need. Also, the variability gets worse as your percent savings goes down because you are relying more on stock returns compared to contributions the lower your savings rate gets. And this is measuring financial independence, ignoring social security, which provides some cushion. Regardless, the difference in time required is significant enough that most people should be aiming for retirement at 55 or 60 at the latest, so that if their timing ends up being unlucky than still have a chance of retirement by 65ish.
Also shows how important it is to start saving early. Most calculators would show that if you start saving 30% at 40, you're going to be able to retire earlyish, even if you have done little saving before then. But historically, some people that followed that route would have been able to retire in their mid 50s, and others would have had to keep working until their mid 60's, and of course not everybody is fortunate enough to do that and very few are fortunate enough to be able to save 30% year in, year out, over even 15 years, much less 25 or 30.
I hadnt looked in months. YTD I am down 21.6%.
Looking at how much $ that equates to compared to what I am down, I can see the average 401K being down $34k. Everything I read about 401k is that on average we as a society are woefully underfunding our retirement.
Hellen Keller saw this coming over the last few years, but it still sucks when it happens.
Looking at how much $ that equates to compared to what I am down, I can see the average 401K being down $34k. Everything I read about 401k is that on average we as a society are woefully underfunding our retirement.
Hellen Keller saw this coming over the last few years, but it still sucks when it happens.
Mine is down 21% for the year but I'm hanging in and still buying. My mom is retired and can't afford to have hers go down so the advice given her was to move it all into safer more stable bets which she did and to pay the company a fee to "manage it" instead of doing it herserlf. She did that and hers is UP 0.5 One half of one percent doesn't pay the bills but at least it leaves dollars available to pay them with.
That's 5% on actual performance? Or 5% down after contributing all year?
My balance in accounts holding stocks (I don't hold any bonds or cash except for cash for short term needs) is "only" down 10%, but we are still in the thick of the accumulation stage. Not sure how actual weighted performance would be. Ignoring the timing of the savings from this year and just assuming they have zero return, we'd be down around 15% I think.
Even then, they should have throttled down their 401k in a certain percentage to protect the money needed at retirement +3 years. During that time, the market will adjust back to growth and you will make up the losses on what is still in the market. People act like your assets at the time of retirement are locked, in reality you have maybe another 5-10 years of growth opportunity beyond 65 for the part of your portfolio still in a conservative market segment.
Being 25 years from retirement, I am trying to buy literally as much as I can at this moment. Sure, we haven't hit bottom yet, but I like the opportunity to gain 30% on today's money to get back to the 20% lost in the market on the rebound from this point. It may take 2 years to see it, but it will get there.
I feel like she should move half of her assets back into the market at the moment. Leaving enough in safe harbor areas to access for money in the next couple of years and leaving the other in the market to realize the gains. Once markets get back to Dec 2021 values, move it back over. She may gain 30% during that time.
Now, she should definitely talk to her financial advisor about this, but the logic is there.
As crazy as it reads, I have not looked at my portfolio in roughly 12 months. I shred mailed reports without opening (including annual 1099s, much to my CPA's chagrin). I have a set DOW number in my head that will trigger my next observation of portfolio results. I suspect that I'm off between 18 and 24 percent, much like everyone else.
My wife and I have combined investments. We've lost over $100k since last year's high. Our financial managers have been on recession protocol the last two months to minimize further losses. Their belief based on market performance ahead of past recessions is we haven't found bottom yet, and the recent uptick is both a big shark and day-trader tease.
I haven't paid attention to bonds, but just assumed bond funds have been getting hammered pretty good to as interest rates moved up. I guess if they've been doing it right they've been moving money into short maturity bonds?
It looks like John Cohen has been in charge of my 401k
Exactly. It freaking sucks. Luckily I’ve got a ways to go before retirement, unles I hit the powerball tonight.
Yeah, bond funds are well down. Cheap now,by recent history but not by historical standards. In hindsight, having a chunk in stocks that perform well in a downturn would be good, so as to sell them now for bonds and rebalance.
My 401k / IRA and taxable accounts are 95% stocks and 5% blend. I use my rental portfolio as my bond allocation. My net worth is split 50/50 between stocks and rental. YTD my return is 8-10%. Can’t wait for my stocks to actually contribute positive returns again.
Good point. Actual performance I'm at the end of my career so my 10% of salary contribution (5% from me and 5% from my employer) wpuld only add a couple of percent on the year if I counted contributions in the calculation.
Shrug. If you've considered your objective, time horizon and risk tolerance...and diversified it along those lines, just relax. If not, probably screwed up.
This year's market shouldn't be a reason someone can't retire.
I'd guess because gold pays nothing and the dollar is really strong. Not a good combination in the current environment.
I'd guess because gold pays nothing and the dollar is really strong. Not a good combination in the current environment.
Stick with value stocks no matter your time horizon for the next year or two. I think it's a great time to be adding to bonds too.
Coming into today:
Bond Index -16% ytd
S&P -18% ytd
Nasdaq -29%
Vanguard Value ETF (VTV) -6% ytd, 2.8% dividend
Vanguard Equity Income (VEIPX or VEIRX for admiral shares)-2.4% ytd, 2.9% dividend
Use the VTV for a taxable account and VEIPX for for retirement accounts. If you buy enough (not sure the minimum) buy the Admiral shares which are cheaper which the symbol is VEIRX.
For your 401k I'm sure you have a value fund option. If I was +10yrs from retirement, I'd be 8-10% money market (should be paying 3% at least by now, 10-20% short term treasuries, 60% value stocks, 10-20% growth stocks
Nearing retirement: 10-20% cash/money market, 20-30% short term treasuries, 50-70% Value stocks
Coming into today:
Bond Index -16% ytd
S&P -18% ytd
Nasdaq -29%
Vanguard Value ETF (VTV) -6% ytd, 2.8% dividend
Vanguard Equity Income (VEIPX or VEIRX for admiral shares)-2.4% ytd, 2.9% dividend
Use the VTV for a taxable account and VEIPX for for retirement accounts. If you buy enough (not sure the minimum) buy the Admiral shares which are cheaper which the symbol is VEIRX.
For your 401k I'm sure you have a value fund option. If I was +10yrs from retirement, I'd be 8-10% money market (should be paying 3% at least by now, 10-20% short term treasuries, 60% value stocks, 10-20% growth stocks
Nearing retirement: 10-20% cash/money market, 20-30% short term treasuries, 50-70% Value stocks
Change your allocation. You have a choice in your 401k. You must be heavily focused on growth stocks and there's growth stock funds out there down 30-40% easy. Some much worse.
ETA: This was intended for Jeathrexdawg. Still not sure how to quote people.
ETA: This was intended for Jeathrexdawg. Still not sure how to quote people.
Oh, you meant buying actual bonds instead of funds? A good option for near retirees still putting money in today, but a year ago the payouts on those were squat. Might as well be holding cash or CDs.
10% of a portfolio in CDs will still generate a little return, and provide a guaranteed ~3 years of withdrawals, which should ride out most downturns.
I've always considered my income to be my "bonds". When there's a correction, instead of rebalancing and moving money from bonds to stocks, I'm just steadily putting more money in with a lower valuation now. I guess I'm getting to the point where the contributions are too small in comparison to the total for that to meaningfully buy down the average cost, but I still have a long enough horizon that I think staying all stocks is fine. I think I could probably cut down on my volatility by adding some bonds, but not sure I'd really improve my performance any.
Getting easier to find stocks that look more attractive. Can't say I don't like this action we're seeing now. While I think the Fed's strategy isn't amiss, I do think there's a trap in the housing market because I don't think increased interest rates will offset the drop in new home prices for most markets until inventory ticks up. But we shall see...
Your 401k you do have control over I would think you'd have several mutual fund options. To be down 26%, you're selections are on more growth oriented strategies and probably some international as well.
I'd stick to more US Large Cap value funds for now, use some treasury money markets/stable value funds as well. Maybe like 70-80% stocks, 10-20% money market/stable value, 10-20% in short term Treasury fund.
You should see whether there is a self management option. Not sure how common it is, but at one of my employers, I had the option of paying $500 a year and self managing. Could have bought individual stocks or index or mutual funds they didn't offer.
ETA: My wife has two retirement plans with her employer. One of them was actively managed, one of them you could opt in to having it actively managed. My dumb indexing strategy was up by almost $3k after two years, which percentagewise was a huge difference. Then they changed to where you could opt out and I did. Now certainly that was actively managed during a bull market, so maybe the actively managed accounts are doing better now that we're in a bear, but thought that was a terrible plan to have people locked into.
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