Oddly funny

[LA_MERC_eX1|eS' ch1|d]

A few years ago I decided to start a 401k through my work so I could have a little money when I retire. Since I didn't know anything about the stock market and at the beginning their was only a small amount of money in the account I figured that the Mutual Fund was the best thing for it. Whelp it's 3 years later now and after talking to my brother some and reading up on the stock market I figured it's time I start trading.

This is the funny part. I get out my most recent statement from my 401k, which I never opened after the first one I received because I didn't understand it, and checked my present balance. My balance was $12,362. On another line it said that I had contributed to my account a total of $12,167.

Huh?

I've made a whopping total of $195, about a 1.5% return on my investment. For those that don't know the stock market as a whole averages 9% a year. So I'm behind 7.5%. Well I guess I learned to do some more research before just assuming that the Mutual Fund Manager is a proffessional and has to know what he is doing. So to anyone else out there maybe you should check up on your Mutual Funds and make sure that those idiots know what they are doing.

Here's some brain tease for you, about 80% of Mutual Funds don't do as well as the market average. It doesn't take a whole lot of time to do a little research and in the end it will be worthwhile.

But it's still kinda funny to me.

[LA_MERC_MadMAX]

I'd kill for the $195 at this point :)

[Slayer]

Mutual Funds have little risk, since your money is combined with the money of others and is spread thinly between many investments. You could completely bomb in one investment and still lose little money.

Consequently, the little risk brings little rewards.

Since it's only been 3 years and you didn't put in a WHOLE lot of money into it, that figure actually sounds dandy, believe it or not. :)

[LA_MERC_LaTech]

I agree with Slayer. It could have been a whole lot worse. I have my investments diversified in several different money markets (foreign and domestic) and am following an "agressive" stance (I'm young and won't need the money for a LONG time). It's all in how you play the game.

[Redneck]

You also have to take into account that Inflation grows at a rate of 8% (might be 6%, Dirge or Andy will have to correct me on that). So actually your loosing alot of money in the long run with that fund. You should begin to look at diversifying and with 12K to do it you should be able to make your money work for you.

[LA_MERC_Dirge]

It depends on what kind of mutual fund you had selected. Sounds like you had a high-growth fund. These funds have experienced very slow growth over the past 5 years due to political and economic events. I haven't checked in a few months, but the best bet going for long-term investment was currently the mid-cap market funds with a sprinkling of high-growth (10-20%).

Inflation would not be that big of an effect on a mutual fund since inflation impacts consumer prices more than anything else. Inflation has actually fallen below 6% and varies between 3-5% during healthy economic times, which we are in).

While mutual funds by definition are diversified (this keeps them from absolutely tanking, but too much safety mitigates the potential for gains), I would further diversify your 401K through multiple mutual funds. For example, I have mine currently set-up with about 40% mid-cap, 30% high growth, and the rest in my company stock. If you are close to calling it quits of course, switch everything to money market funds which offers a stable (low to no risk) return, but of course is only marginally better than long term treasury rates.

[CajunTech]

I pretty much follow Tech's 401k strategy.

[Badger]

Since I was formerly licensed in variable products, I'll tell you just what everyone else is saying....be thankful. You're a little bit ahead during one of the worst times in history for the market. The growth hasn't been there in a long time.
Watch it yes, but don't feel disappointed that you have a positive balance there, plenty of people have huge losses or nothing.

[LA_MERC_YellowDog]

plenty of people have huge losses or nothing.

Especialy " ENRON " investors:(

[Slayer]

Ahh yes, the Stock Market HAXORS!

[LA_MERC_Andyconda]

You definately need to be a littel aggressive when starting your 401k. It's hard to see growth in a short time as well. It's not untill you have money that you start to see money. Last time I checked mine at a little over 52,000 I saw that I had only contributed 24,000 to it. My previous company and the one I'm with now matched my contributions up tp 6% so they added another 24,000. That means I only gained 4,000 in 7 years. This is maionly due to the fact that although I diversified I left a large portion in a high yield S&P 500 stock that did better than most. The downside is it was a risky market with moderate returns. I now tend to diversify in more stable accounts as I have a large sum built up that I don't want at high risk. What little I know about investing and the stock market, I can some it up as "Educated Gambling". The one and only reason to do 401k is company match and government tax breaks (that you don't get unless you let them mature, so leave your 401k alone untill it's time, for us around 68). Did you contribute all 12 or was some of that company match. IF no cmpany match you would be better off puting that money in an IRA or CD.