When I started at my last job, I signed up for the 401(k). (A 401(k) is one of the most lucrative ways that you can invest in a tax-advantaged way with scale.)
I picked some investments, a reasonably diversified set of a few funds, and called it good.
As often happens with companies, they eventually switched 401(k) providers. They did this around the same time that I left the company. With so much going on, it was low on my list to look into the new provider, so I left it for a while.
Until now. I recently logged into my new provider, a company I hadn’t ever heard of, and was appalled.
Who are you and what have you done with my investments?
I guess I had expected that the new provider would have kept everything the same, the same investments, the allocations, as I had had with the previous provider.
Boy was I wrong.
Instead of my mutual fund choices, chosen for their simplicity and reasonable level of aggressive growth, I now had what was known as “Moderate Portfolio”.
What was this thing?
What I saw was a generic portfolio which had almost no correlation to my own investment choices. There were understandable choices, such as the Vanguard Total Stock Market Index, but others I had never heard of at all. What the hell was “DFA Emerging Markets Core Equity” and why was it part of my portfolio?
Raise your hand if you don’t know what’s going on with your 401(k)
You may not have such an extreme situation. Your portfolio might not have been sold to some other company, and replaced with an entirely unrecognizable one.
But I bet it’s been a little while since you checked in with your investments. In fact, I’d wager that a majority of people sign up for some investment portfolio when they join a company, and never look at it again.
Does that sound like you?
Even if not, if it’s been a few years, you may want to look at what you signed up for. What made sense then might not make as much sense now.
Here an non-exhaustive list of things you want to look for:
- Does your portfolio have a track record that matches your expectations? If your performance isn’t as good as, say, the S&P 500, at least over a multi-year period, and assuming you’re looking for growth, you might want to re-evaluate your options.
- Did you invest in loaded mutual funds? I personally find it hard to believe that there exists a loaded fund with as good a track record as a broad-based index fund, though feel free to prove me wrong.
- Do you have absolutely no idea what you’ve invested in and why? Red flag. This is your money, so you need to be the one directing it. You don’t need to be an expert, so a simple target-date fund is probably the absolute easiest way to go, especially if you’re not going to look at it for another few years.
I don’t think people need to look at their portfolios very often. Conventional wisdom says around that you should re-evaluate your options once a year. I think that’s way too often. You probably want to look at your portfolio that often at least, but that’s just to make sure that nothing is amiss (like your contributions not posting).
It is a good idea to re-evaluate eventually, though. Especially if this is your retirement account through your job, and if you’ve been in your job for a few years, and especially especially if you didn’t think too hard about your allocations when you signed up.
As for me, it’s clearly high time for me to roll over this old 401(k) into my own, self-directed IRA. I don’t care who this company is; there’s nothing they can do for me that I can’t do myself.