The above picture was taken from my iPhone while using Vanguard’s mobile app. If you use Vanguard, I highly recommend downloading their iPhone app, as its a one of the most sleek and intuitive portfolio management apps out there. (Plus it’s free!)
So after three years of randomly picking funds, receiving poor financial advice, investing in the latest hot security, and thinking I could time the market, my overall return for all that effort is basically sitting at zero.
Don’t get me wrong, I’m not bummed about my returns just yet; I’ve still got a long way to go before I’d need to cash out.Â But I’ve definitely learned a great deal about investing since I first got my 401(K) in 2006:
- I need to stop trying to time the market. I’m better suited going to Vegas if I have a gambling addiction.
- I need to stop picking random funds.Â Expense ratios are the only important measure and Vanguard is the way to go.
- Investing wisdom is defined by how much financial information you choose to ignore, not by how much you financial information you actually have.
- Stocks and funds that did well recently are generally overpriced.
- Most financial advisors are intent on ripping you off.Â (See Jim Cramer and Ben Stein)
4 thoughts on “My 401(K) Five Year Return Chart”
I enjoyed your post, and agree with many of your points. Unfortunately, the role of investment manager is thrust on 401k investors, even though it can be a frustrating and complicated experience. Chasing returns, timing the market, etc. are all mistakes so many investors use. If you are going to continue investing on your own without advice, index funds and balanced/target date funds should be a nice option for you. Once you start accumulating a significant balance, you might want to ask your employer to consider offering advice from an independent third party. Make sure the advice you receive is from a third party that has no financial ties to any of the investments on your 401k platform. Bad advice is worse than no advice at all.
Very well said. Here’s to hoping that the next 5 years go better. 🙂
I am new to investing and personal finance. Could you advise where and how I could begin about sound investment options/ tools?
It’s difficult to give good advice without understanding your current situation, but if you just need a place to start, go to the Vanguard.com website. If I had to summarize investing in three words, they would be “Vanguard Index Funds.” If you’re not sure of which one to pick, go with either VFINX or VTSMX. Those are two of the most popular and will give you the diversification you need. I would also recommend reading the book “The Boglehead’s Guide to Investing.” I would’ve endured much fewer headaches had I read that book before I started investing.