10.3% return in 2006 in my 401k. Is this good?

Question

Is this a good return? Am I doing okay diversifying? Right now I have a bout 85% in stocks (large, small, and international) and 15% in bonds and short term investments.

28 years old.. on agressive mode right now.. i plan to retire at 50

Answer 1

well that all depends on your own financial objectives, which are influenced by your age, income and lifestyle.

your return so far is decent. but then again, we don't know too much about your objectives.

if you are 60 years old, maybe you want to go a little more conservative. if you are 20 years old, you may want to go a little more aggressive.

Answer 2

Although a 10.3% return is good, for the diversification that you have, you should have done better. For instance, my investments are 55% stocks, 35% bonds, and 10% cash and equivalents. Between Oct. 1, 2005 and Sept. 30, 2006 I grossed 10.8% and netted 9.9%. As you can see, I took on a lot less risk, but received roughly the same return as you. Now the stocks I'm invested in are all large cap stocks which, of course, have done better that small caps over the last year. But still, you should have earned more than you did given the risk you taking.

Answer 3

Given the 85%-15% breakdown in your 401(k) portfolio, one would assume that you are a relatively young person who is investing for growth and expects to be working for many years to come. (If that were not the case, you would be expected to have a greater percentage in bonds and short-term.) If that is so, a 10.3 return for 2006 in a growth portfolio is just fair - i.e., many growth portfolios have done better in 2006, which has been a good (if not great) year for the market overall. However...., the success of a 401(k) account cannot be properly measured by its return for one year. The breakdown is correct for long term growth, and may well show above-average returns in the long run. Your concern about diversification suggests that you have a sizable number of stocks (mutual funds?) in the account. It may be that a concentration is in order. Don't be too hasty to make changes because of the modest return. A retirement account should be somewhat conservative. It will never lead the pack, but - believe me - there are lots of working people who wish their 401(k)s were returning 10.3% this year.

Answer 4

10.3 is about as modest as they get. Don't neglect the contributions your company may have added to your fund, that should be a mental note with your 401k investment. I'd say you are underperforming and there are a lot of relatively safe investment choices you can make that will give you a better annual return. You must always do your research if you wish to maximize returns. From september to october I have a 7 percent return with stocks from large cap growth to small cap growth; many people make more money but the idea is to keep up with your research!

Answer 5

That's pretty good return. Historically, the average return for the market has been 11%. Since the market hasn't been doing as well recently, 10% is pretty good return. As you get closer to your retirement, you should transfer more money into safer and guaranteed investments.

Answer 6

Not bad.

The S&P (and Dow) is up about 12% YTD.

Bond indexes are up about 3.5% YTD.

I personally don't care for bonds in my looooong term investment portfolio since bonds typically underform the stock market.

Answer 7

ok but below the averages. Too much in bonds for age 28. That total should be zero for now. Don't forget gold (IAU) & EWA (australia) along with some reits if want some better than bond income.

Answer 8

much better than the indexes, keep up the good work. Is it time to rebalance?