I understand your concerns about the performance of your 401K in the last 3 years. It’s frustrating to see a significant drop in its value, especially when you have been contributing diligently. Let’s take a closer look at the numbers to gain some insight.
Your beginning balance in December 2020 was $115,000. Since then, you contributed an additional $37,000 and earned $10,000 in interest. However, you also experienced losses of $27,000, resulting in a current balance of $135,000. 📉
It’s important to remember that 401K is a long-term investment strategy, and short-term market fluctuations are not uncommon. However, it’s worth analyzing whether there might be factors contributing to the drop.
You mentioned that you selected your fund picks through Merrill Lynch’s survey, opting for reasonably conservative choices. While conservative investments typically provide stability, they might not generate high growth. This might explain the slower growth of your 401K compared to what was projected. 📈📉
Another factor to consider is the timing of your contributions and the market’s performance during that period. If you received a significant raise in late 2021 and contributed a large portion of your 401K during a market dip, it could have influenced the overall growth rate. 💼
Additionally, you mentioned that you might be over-diversified. Having a diverse portfolio is generally recommended for reducing risk, but over-diversification can limit potential gains. It might be helpful to evaluate the composition of your investments and consider consolidating them into a more focused strategy, such as investing in a target-date retirement fund like the Target 2040 fund. 🎯
While it’s disheartening to see a decline in your 401K’s value, it’s essential to stay focused on the long-term perspective. Over time, the market tends to recover, and your investment has the potential to rebound and grow. Considering the context, it’s worth reviewing your investment strategy and making adjustments if necessary. 💪
Remember, seeking advice from a financial advisor or discussing your concerns with a representative from Merrill Lynch can provide personalized guidance and help you make informed decisions. 📊💼💡
I hope this information helps clarify the situation, and I wish you success in achieving your long-term retirement goals. 💰🌟
if we look at something like the VTI in the last 3 years… Just say October open. It’s up 25% at the moment. Of course a lot of other things are down quite a lot. The market itself, not so much.
What is it invested in? The S&P is up since Dec 2020.
What’s your age and investments?
Generally, the market has been pretty volatile these past 3 years. Though of course that’s to be expected in any short term period.
Specifically, what funds are you invested in? (Name, expense ratio, ticker if they have one)
Leave it alone. We’re in and have been in a down market. It will go back up. Don’t try to time things. That is all.
You are underperforming the market by a lot. Would need the exact funds to say what happened.
Dude just go SP500 index funds.
Look at YTD, 1YR, etc… basically a few different windows of time. Everything went up like crazy during the pandemic, then crashed… you have to take that into account when looking.
The market is still down 10-11% since end of 2021 (the peak).
Unless you sold, you haven’t lost anything
If it’s any consolation your 401k is holding it’s value better than my car.
Forget the stupid target date funds, and what the investment provider recommends. Pick a fund that tracks the S&P 500 like Vanguard 500 Index Fund. Once you do that for new contributions, move your current allocations to it. Now, set it and forget it.
Just make it super simple – I saw you said you are 35…
Invest 100% in a target 2050 or 2055 retirement fund. They should offer them to everyone.
Start there, then learn and you can start trying to change it, but for 99% of people that should be pretty good.
Too overspread. RET Trust, vanguard bond market, mid caps, small caps. I can’t fix what happened. But I will say no do not put the money in the bank. You still have a portfolio of $130k that you can rebalance.
The default plan on my 401k is a hot mess like yours with way too many funds. I had to make my own % of the sp500, midcap and smallcap available instead of using their suggestions and set it to auto rebalance.
My vanguard retirement took a small dip a little while back but has since recovered. Maybe different allocations I guess, if it’s further out might have riskier allocations?
This is simply how it works. This is why the long game is important. This is why you have to stay in for 10y+.
Right now you are cherry picking dates to make your 401k seem inefficient. December 2020 probably wasn’t the peak, but if you had this same conversation in December 2021, I’m going to guess your account was doing well and profitable.
Since 2021 the market has dipped in general. Correction for the crazy time we had in 2020 maybe, although the reason is irrelevant. This is why timing the market is a losing bet for most. If you bought in 2021 expecting to make money, you probably didn’t.
More importantly if you look at the lifespan of your Trowe price account, you can see it historically has gained. You didn’t just drop 115k into your 401k and start there, it doesn’t work like that.
Now, I’m not saying your 401k is optimized to your actual preferences, or if you should change. But unless your 401k was all in Nvidia or the SP500 (and most target retirement funds won’t ever be), then what you are looking at is largely normal. What you need to do is look at your gains from inception. This may be a dip. Should you have contributed at the peak? Probably not. But could have you predicted it? Nope.
Remember, when the market dips, as long as your contributions remain the same, you are also buying the dip. This means when the market recovers it recovers in your favor which theoretically should offset your contributions during the peak. Just stay course and everything should gain over decades.
Or you could change up your retirement contributions, assuming you even have a lot of flexibility. Mine certainly doesn’t.
I’ve invested in Growth Medical and Tech. Tech did 66% gains last 12 mo.
Just go 100% Total US Stock Market and you can set and forget
>My fund picks were generated by filling in ML’s survey (how
So what did you invest in?
VOO is up 17% from Dec 2020, sounds like you picked some bad investments
The one thing to keep in mind about assets is you don’t lose money until you sell. Until then, it’s just a fluctuation in the market value of whatever the thing is.
If your invested conservatively you could be in a lot of bonds or bond funds which are down compared to something like VTI
If you have a lot of bonds that could be a big part of it. Bonds are down 50% in the last three years. People thought buying bonds was conservative but it is more volatile than any time I’ve ever seen. Check out the bond ETF ticker TLT.
It’s been a weird market. I have a significant portion of my retirement not in the recommended funds but in index funds because they seem to be giving the highest returns now.
The recommended fund, in my case is some Fidelity thing that tries to balance risk with when you’re going to retire and it’s been complete poopy caca. I still have some money in it but I’m considering pulling it all out as it is in fact losing money.
Bidenomics… You are not alone…
How do I set my contributions to match what the S&P 500 has? I am on my 401k website but I don’t see that specific index.
Take a deep breath.
Unless you have invested in something that has gone bankrupt you have not lost anything.
The only times the price of a stock, bond or mutual fund counts is when it is purchased and when it is sold. What you have is a paper loss.
One note regarding your edit. When you got the raise and purchased more stock than anticipated, you were buying it at a low period. I would call that a fire safe. As the market rights itself you will be glad you have that extra stock. That is the advantage of dollar cost averaging.
in 2008 when the floor dropped out, I took an extra $1000. out of my savings account and put it in my Roth IRA. I bought Cisco at about 13. It hasn’t been that low ever again.
I am not a gambler on the market. I believe in holding like you do, but that drop in Cisco was just too great a chance to pass up. I wish had bought more Apple as well.
With a $135k balance, a 2040 target date fund seems like it’s going to be way too conservative.
You should read/listen to “A Simple Path to Wealth” by JL Collins.
You probably have/had quite a bit in bonds. They’ve generally gone down in value over the past couple years.
I had a 401K and built up a good pile of cash, but when my full-time employment ended, I transferred it to a managed IRA (Chase) and in a 3-year period it’s gone up about 27%.
And I have it setup up for Investment profile
Investment objective: Growth
Risk tolerance: High
Time horizon: Greater than 10 years
So in my case it worked, since I’m making money. During my 401K days I think we had ML for a while, but moved to PWC and the performance was much better.
So, I’d suggest researching IRAs so you can actually make some money.
Based on what you have listed, a major part of your underperformance has been because you dollar cost averaged in during the recent peak. Also, you were not as heavily in the magnificent 7 stocks which have been the main stocks that have gained the most since the drop. The mega caps are what has been driving the S&P 500 and Russell 2000 and you were underweight those.
If you’re not looking to retire until 65 or 70, I’d just be in something like 100% in the Vanguard total market. Or any other low fee fund that tracks the S&P. You’d have such a long time horizon of 40-50 years before you’re taking that money out. Let that compound interest ride.
Also, you should change your thinking. Your portfolio going down is a good thing right now. You are positive cash flow and putting more money into the market. Would you rather be buying at higher prices? Or lower prices? Your 401k value appreciation feels good for now, but future retired you wishes prices are even lower.