401k portfolio
Merry Christmas everyone !! I recently saw a post on blind where people were talking about rate of returns on their 401k. The post had numbers like 30%, 37% and I was surprised. I just graduated college and started putting in 401k. Being the noob that I am, I chose the fidelity net benefits and the plan where they manage the portfolio for you. But this yielded a return of just 2.21 % so far ( I joined msft only in October and have been maxing out my contribution) I am wondering what’s the composition of your 401k ? How do I manage mine to get higher returns ? Do you recommend taking it off from auto managing option from fidelity and managing it on my own ? Thanks !!!
If you put your money in any Index fund tracking S&P 500 then you’d have about 30% return this year on it. 401k also have high fee funds (actively managed) so check whether the automanaged fund is actively managed, index fund, or target dated retirement fund. If you don’t know how to manage just select a Target dated retirement fund (based on your approx retirement age 65) and forget about it to keep fees minimum. Comparing these three types: Target dated fund will have most conservative returns - low risk low reward Index Funds are Medium Risk Medium Reward Actively managed funds are high risk low/medium reward
Thanks for the info !
The 30% returns come with a bit of risk. Make sure you have the risk appetite and are also willing to lose 30% if the markets do badly. Secondly, look at the fees for your managed account. Usually it's north of 1% , which is huge.
Yeah, I think I will follow the advice here and try to manage on my own. Thanks !
If you want better returns, you should do some research. Otherwise you get hosed.
You have to give it more than a few months . The one talking about 30+% returns have absolutely not averaged that over any significant period of time like 20 years. Some index funds have give such handsome returns this past year... but not if you looked at them at certain times of the year! If you look at major market indices since 1999 returns are more like 4% per year
Yeah. Need more precise numbers. Is 2per¢ annualized or over 2 months?
Good point 2% over 2 months is 12.6% annual
+30% return portfolios come with the risk that in a bad year they could as well be -30% or less
Default 401k allocation is usually a conservative target date fund. You should look at the fact sheets of what funds your 401k offers and pick the ones with a solid year over year return. These will typically be an index fund with large or medium capital requirements for the companies in them.
Thanks for the advice !
As long as you are taking an appropriate level of risk for your tolerance and horizon, ignore 2% return over two months. Plus, everybody brags about their wins and never mention their losses...
Thanks, yeah makes sense !
I also had 2% return on my 401K until I started trading using their Brokerage link account that is a brokerage account connected to the 401K account. I am getting around 14% return year over year. With 401K you can afford to wait even if there are losses in your account. I was down by 27K for several months because of Tesla stock until it recovered. So, just invest in good companies and index funds to get better returns.
S&P 500 is up like 30% YTD...
You're doing half as well as you would be if you just shoved it all in a target date fund. Vanguard's 2055 target date fund is up 25% YTD. Don't trade unless you can spend the time and effort to research your shit.
What are the benefits of using a brokerage link account compared to picking the large cap funds from fidelity? Doesn’t brokerage link carry additional risk?
What do you mean? What is riskier ?
I had one small (~20K) 401K acct on auto manage (by empower) and my big acct (~400K) self managed. My auto managed account was performing 2% and my self managed was performing at 30%. Nothing special about allocations. Good amount in S&P and bonds. Hopefully market doesn’t tank anytime soon, but even if it does I’m not retiring for 30 years.
Thanks !