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I haven't touched my 401(K) in over 30 years. It's done 9-20% per year. It's not super aggressive, but will take a hit, on really bad markets (the only year it

I haven't touched my 401(K) in over 30 years. It's done 9-20% per year. It's not super aggressive, but will take a hit, on really bad markets (the only year it actually lost money, was 2020 -and it has completely made up for that. It even made some money in 2008). I ignore the Fidelity calls. Every time a new broker rotates in, they try to get me to move my money around.

benrapscallion 2y ago
Is it invested in an index fund?
- ChrisMarshallNY 2y ago
  Yes. I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays.
  - deleted 2y ago
    [deleted]
  - lkdfjlkdfjlg 2y ago
    > I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays. That's one of the ridiculous aspects of fixed-percentage allocations: by constructions those allocations tell you that you should get rid of the things that are making you the most money, and put it into the things which are underperforming instead. (I get that you didn't do that, I'm just got reminded of it.)
    - carbotaniuman 2y ago
      The tradeoff is you lock some of those gains down in safer assets. Probably the wrong choice for retirement earlier on, but if you need money during an economic crisis, say you got laid off, then that might change how it's viewed.
      - mattmaroon 2y ago
        That’s very true, but he’s had the account for 30 years and assuming that means he started it young, 50% in bonds is borderline insane. It’s a lot more likely to cost you a large amount in retirement than bail you out in your 30’s.
        ChrisMarshallNY 2y ago
        Well, what’s done is done. I was planning to bail, back in my 30’s, but changed my mind, and stayed for almost 27 years. It still makes more than I spend, but we’ll see what the future brings.
        mattmaroon 2y ago
        That’s the great thing about saving, even if you do it suboptimally, it still is a lot better than the opposite. And in hindsight it’s almost always suboptimal.
        ghaff 2y ago
        You can do insanely stupid things of course. But saving in some remotely rational and diversified way is better than not saving at all even if some bets turn out to be better than others.
        Majromax 2y ago
        Applying optimal portfolio theory to the long history of market returns suggests that the most risk-efficient allocation is something like 60% stocks and 40% bonds. The diversification reduces volatility faster than it reduces the overall return, so equity-like returns can be regained by using leverage on the portfolio. Following this advice today is tricky thanks to the persistent yield inversion: you obviously can't improve returns by using short-term borrowing at 5% to invest in long-term bonds at 4%.
        throwaway2037 2y ago
    - milesvp 2y ago
      You are thinking about it backwards. Humans have a tendency to buy high and sell low. It seems to be a psychological benefit of some sort that holds us back in abstract market scenarios. By having a fixed percentage portfolio you are forcing yourself to sell high and buy low. This was also the only basic strategy that mathematically beats the market based on papers I read during undergraduate (there may be others now). Basically, by splitting investments among higher and lower investments that are out of phase you can make sure that you are moving money out of an investment before it falls and into it before it rises. What I find interesting is that the advantage only works with discrete periods of rebalancing. Instantaneous rebalancing doesn’t provide any advantage. I do not understand why but I saw a paper that showed that being able to take advantage of phase shifts in nearly correlated signals goes to zero as delta t goes to zero.
      - lkdfjlkdfjlg 2y ago
        > By having a fixed percentage portfolio you are forcing yourself to sell high and buy low. Yes, and the things you sell high are the ones that performed well in the past, so you'll have less of those in the future, which is what I said. I'm not thinking about anything backwards.
        UncleMeat 2y ago
        The question is whether "thing that did well in the past" is more or less likely to do well in the future than "thing that did less well in the past." This seems to vary somewhat by "thing."
        milesvp 2y ago
        If you can time the market, then by all means, do that. The reason periodic rebalancing works, is because stocks and bonds don’t exclusively go up (or down). By rebalancing you can take advantage of a racheting effects as a result of signal variance. By rebalancing at set times, you can overcome the psychological effects of waiting just one more day to get gains that then evaporate while you watch. I’m having a hard time finding the paper around instantaneous rebalancing eroding the effects (or any good papers atm). But you can model this very easily. You can take 2 signals that randomly walk up or down. One at a “high apr” and one with a “low apr”. I’m not sure if it matters, but typically I’d expect the lower apr to have lower variance of the 2. Most of the literature around rebalancing assumes lower volatility of at least one asset class, but I’m not convinced it’s necessary from some of the math I’ve seen. You may need to add an assumption of correlation between the 2. Be sure to include code that if a signal reaches 0 it stays there. Be sure to backtest as well. Few strategies work in a bear market, but rebalancing is expected to still outperform when markets go down. Kelly criterion is another thing to look up. It’s a mathematical look at betting stategies and what’s the biggest bet you can afford to make in the long term given that no bet is 100% gauranteed.
    - ozim 2y ago
      Not underperforming but with less risk. If something goes to the moon there is high chances it will drop back to the ground. So you want to put some of that growth into something that will keep on flying.
      - lkdfjlkdfjlg 2y ago
        I guess we think about risk very differently.
    - njarboe 2y ago
      I think that this holding stocks and bonds and then re-balancing every year or so is advice from back in the 1980's when historically bonds got under valued when stocks boomed and vice versa, so this made sense. I don't think that works so well now, especially when we had zero or negative interest rates for such a long time. If you can tolerate the risk (have a large amount of assets relative to your spending), investing in close to 100% stocks for retirement makes more sense.
      - verzali 2y ago
        Interest rates haven't been near zero for a while. I am not sure the logic of being 100% in stocks still makes sense right now, especially since you can get 4-5% interest in cash accounts and bonds are also starting to pay higher rates. Stocks are high right now too, and it's hard to see that stocks will deliver high returns from this point. Looking ahead, there are plenty of risks of inflation returning, especially in the US, and so I suspect rates are unlikely to fall back as fast as a lot of people are assuming.
    - mcguire 2y ago
      The volatility of stocks is much higher than that of bonds or some other asset classes. If your time horizon is shorter than, say, five years, or if you are the sort of person who checks your portfolio daily, keeping a portion of your portfolio in bonds will drastically reduce your personal volatility. I have an inherited IRA that I am required to take mandatory withdrawals from; I keep part of it in bonds so that I don't have to sell my stock funds when they're down.
  - throwaway2037 2y ago
    Bond funds are weird to me because you cannot hold to maturity to realize yield-to-maturity. The only point to them is to get coupon payments. Is your bond fund total return or, if not, what do you do with the coupon payments? To me, it just seems better to buy outright mix of 2yr and 10yr US treasuries and always hold to maturity.
    - chii 2y ago
      > just seems better to buy outright which is fine, but you're just adding administrative burden on yourself. The bond fund is doing exactly what you're trying to achieve, except that they reinvest the bond capital back into new bonds when they mature. You get the coupon payment as income, and you sell the bond fund when you want capital back. The price of the bond fund is a reflection of the value of the bond at market prices - exactly as if you would yourself, if you held the bond directly, and wanted to sell before maturity. You might eek out a tiny bit of efficiency due to lack of fund fees you pay, if you held bonds yourself - but then the administrative burden you have to do yourself is going to cost just the same imho (via time taken for example).
      - bulletsvshumans 2y ago
        Everything you mention is correct, I just wanted to add that holding bonds directly makes sense in the case when you have a date in mind for when you will need the invested money. So for instance if you plan to buy a car in 2 years buying bonds that mature in 2 years has the nice property of being worth a guaranteed amount of money exactly at the point you need those savings. There are etf equivalents known as “bullet shares” but these have an expense ratio that isn’t incurred with owning bonds directly.
        throwaway2037 2y ago
        Hat tip on bullet maturity ETFs. I never heard of this before your post. Ref: https://www.etf.com/topics/bullet-maturity https://www.etf.com/topics/bullet-maturity
  - georgeecollins 2y ago
    It's silly to quibble with your great results (good job!) but its a good idea to re balance your portfolio between stocks and bonds every quarter or every year at a fixed percentage. (60/ 40, 70 / 30, 80/ 20 ratio is risk) Portfolio re balancing, like ETFs is one of those things that has been shown to work over time in many studies. ETFs re balance. The stock / bond ratio was an early form of "automatic" investing.
throwaway2037 2y ago
I don't work for Interactive Brokers, but I do periodically shill for them here on HN! Their market access diversity and rock bottom fees are very hard to beat. It should be possible to transfer a 401k in-whole with zero tax consequences nor booked trades.
- TacticalCoder 2y ago
  Yeah... At times I just take funds I like, read what they re actually made of, and replicate their holdings in IBKR. This way I dodge the fund's 0.5% annual fees and performance fees. 39 cents per transaction is hard to beat. The lump sum of cash on the sideline gets you 4.83% on IBKR (as long you have $100K+ on he sidelines). Cash secured puts you sell bring you yield on the USDs securing the put. Financial reports they make are top Noth and entirely configurable.
usaar333 2y ago
> the only year it actually lost money, was 2020 -and it has completely made up for that. It even made some money in 2008 How did you manage to not lose money in 2022? Almost every asset class was negative then.
- pc86 2y ago
  Most people just look at the balance and forget (in the self-preservation, "I want to be right" kind of forgetting) that they contribution $20k+ that year so unless you've got a multi-million dollar 401(k) or the market was down 10%+ across the board you're very likely to see more on December 31st than was there January 1st regardless.
  - ghaff 2y ago
    I'm not sure that's quite fair. Unless it were 2001 or 2008 people look at their balances and see they're generally up unless they made some big gamble and at least unconsciously conclude they probably did as well as they reasonably could. But that may be what you're saying. Worrying about a percent here or there probably isn't worth it for most people.
    - pc86 2y ago
      We're saying the same things, I just meant you could actually lose a lot of money but see your balance go up, especially with smaller portfolios. As your portfolio gets bigger it's less likely to happen because eventually a single-digit loss over the course of a year might be enough to wipe out more than the max contribution.
      - ghaff 2y ago
        Yes. Even if your overall balance is going up, it makes sense to keep your eye on doggy investments. I really cleaned shop a couple years ago and I'm glad I did.

benrapscallion 2y ago

Is it invested in an index fund?

ChrisMarshallNY 2y ago
Yes. I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays.
- deleted 2y ago
  [deleted]
- lkdfjlkdfjlg 2y ago
  > I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays. That's one of the ridiculous aspects of fixed-percentage allocations: by constructions those allocations tell you that you should get rid of the things that are making you the most money, and put it into the things which are underperforming instead. (I get that you didn't do that, I'm just got reminded of it.)
  - carbotaniuman 2y ago
    The tradeoff is you lock some of those gains down in safer assets. Probably the wrong choice for retirement earlier on, but if you need money during an economic crisis, say you got laid off, then that might change how it's viewed.
    - mattmaroon 2y ago
      That’s very true, but he’s had the account for 30 years and assuming that means he started it young, 50% in bonds is borderline insane. It’s a lot more likely to cost you a large amount in retirement than bail you out in your 30’s.
      - ChrisMarshallNY 2y ago
        Well, what’s done is done. I was planning to bail, back in my 30’s, but changed my mind, and stayed for almost 27 years. It still makes more than I spend, but we’ll see what the future brings.
        mattmaroon 2y ago
        That’s the great thing about saving, even if you do it suboptimally, it still is a lot better than the opposite. And in hindsight it’s almost always suboptimal.
        ghaff 2y ago
        You can do insanely stupid things of course. But saving in some remotely rational and diversified way is better than not saving at all even if some bets turn out to be better than others.
      - Majromax 2y ago
        Applying optimal portfolio theory to the long history of market returns suggests that the most risk-efficient allocation is something like 60% stocks and 40% bonds. The diversification reduces volatility faster than it reduces the overall return, so equity-like returns can be regained by using leverage on the portfolio. Following this advice today is tricky thanks to the persistent yield inversion: you obviously can't improve returns by using short-term borrowing at 5% to invest in long-term bonds at 4%.
        throwaway2037 2y ago
  - milesvp 2y ago
    You are thinking about it backwards. Humans have a tendency to buy high and sell low. It seems to be a psychological benefit of some sort that holds us back in abstract market scenarios. By having a fixed percentage portfolio you are forcing yourself to sell high and buy low. This was also the only basic strategy that mathematically beats the market based on papers I read during undergraduate (there may be others now). Basically, by splitting investments among higher and lower investments that are out of phase you can make sure that you are moving money out of an investment before it falls and into it before it rises. What I find interesting is that the advantage only works with discrete periods of rebalancing. Instantaneous rebalancing doesn’t provide any advantage. I do not understand why but I saw a paper that showed that being able to take advantage of phase shifts in nearly correlated signals goes to zero as delta t goes to zero.
    - lkdfjlkdfjlg 2y ago
      > By having a fixed percentage portfolio you are forcing yourself to sell high and buy low. Yes, and the things you sell high are the ones that performed well in the past, so you'll have less of those in the future, which is what I said. I'm not thinking about anything backwards.
      - UncleMeat 2y ago
        The question is whether "thing that did well in the past" is more or less likely to do well in the future than "thing that did less well in the past." This seems to vary somewhat by "thing."
      - milesvp 2y ago
        If you can time the market, then by all means, do that. The reason periodic rebalancing works, is because stocks and bonds don’t exclusively go up (or down). By rebalancing you can take advantage of a racheting effects as a result of signal variance. By rebalancing at set times, you can overcome the psychological effects of waiting just one more day to get gains that then evaporate while you watch. I’m having a hard time finding the paper around instantaneous rebalancing eroding the effects (or any good papers atm). But you can model this very easily. You can take 2 signals that randomly walk up or down. One at a “high apr” and one with a “low apr”. I’m not sure if it matters, but typically I’d expect the lower apr to have lower variance of the 2. Most of the literature around rebalancing assumes lower volatility of at least one asset class, but I’m not convinced it’s necessary from some of the math I’ve seen. You may need to add an assumption of correlation between the 2. Be sure to include code that if a signal reaches 0 it stays there. Be sure to backtest as well. Few strategies work in a bear market, but rebalancing is expected to still outperform when markets go down. Kelly criterion is another thing to look up. It’s a mathematical look at betting stategies and what’s the biggest bet you can afford to make in the long term given that no bet is 100% gauranteed.
  - ozim 2y ago
    Not underperforming but with less risk. If something goes to the moon there is high chances it will drop back to the ground. So you want to put some of that growth into something that will keep on flying.
    - lkdfjlkdfjlg 2y ago
      I guess we think about risk very differently.
  - njarboe 2y ago
    I think that this holding stocks and bonds and then re-balancing every year or so is advice from back in the 1980's when historically bonds got under valued when stocks boomed and vice versa, so this made sense. I don't think that works so well now, especially when we had zero or negative interest rates for such a long time. If you can tolerate the risk (have a large amount of assets relative to your spending), investing in close to 100% stocks for retirement makes more sense.
    - verzali 2y ago
      Interest rates haven't been near zero for a while. I am not sure the logic of being 100% in stocks still makes sense right now, especially since you can get 4-5% interest in cash accounts and bonds are also starting to pay higher rates. Stocks are high right now too, and it's hard to see that stocks will deliver high returns from this point. Looking ahead, there are plenty of risks of inflation returning, especially in the US, and so I suspect rates are unlikely to fall back as fast as a lot of people are assuming.
  - mcguire 2y ago
    The volatility of stocks is much higher than that of bonds or some other asset classes. If your time horizon is shorter than, say, five years, or if you are the sort of person who checks your portfolio daily, keeping a portion of your portfolio in bonds will drastically reduce your personal volatility. I have an inherited IRA that I am required to take mandatory withdrawals from; I keep part of it in bonds so that I don't have to sell my stock funds when they're down.
- throwaway2037 2y ago
  Bond funds are weird to me because you cannot hold to maturity to realize yield-to-maturity. The only point to them is to get coupon payments. Is your bond fund total return or, if not, what do you do with the coupon payments? To me, it just seems better to buy outright mix of 2yr and 10yr US treasuries and always hold to maturity.
  - chii 2y ago
    > just seems better to buy outright which is fine, but you're just adding administrative burden on yourself. The bond fund is doing exactly what you're trying to achieve, except that they reinvest the bond capital back into new bonds when they mature. You get the coupon payment as income, and you sell the bond fund when you want capital back. The price of the bond fund is a reflection of the value of the bond at market prices - exactly as if you would yourself, if you held the bond directly, and wanted to sell before maturity. You might eek out a tiny bit of efficiency due to lack of fund fees you pay, if you held bonds yourself - but then the administrative burden you have to do yourself is going to cost just the same imho (via time taken for example).
    - bulletsvshumans 2y ago
      Everything you mention is correct, I just wanted to add that holding bonds directly makes sense in the case when you have a date in mind for when you will need the invested money. So for instance if you plan to buy a car in 2 years buying bonds that mature in 2 years has the nice property of being worth a guaranteed amount of money exactly at the point you need those savings. There are etf equivalents known as “bullet shares” but these have an expense ratio that isn’t incurred with owning bonds directly.
      - throwaway2037 2y ago
        Hat tip on bullet maturity ETFs. I never heard of this before your post. Ref: https://www.etf.com/topics/bullet-maturity https://www.etf.com/topics/bullet-maturity
- georgeecollins 2y ago
  It's silly to quibble with your great results (good job!) but its a good idea to re balance your portfolio between stocks and bonds every quarter or every year at a fixed percentage. (60/ 40, 70 / 30, 80/ 20 ratio is risk) Portfolio re balancing, like ETFs is one of those things that has been shown to work over time in many studies. ETFs re balance. The stock / bond ratio was an early form of "automatic" investing.

throwaway2037 2y ago

I don't work for Interactive Brokers, but I do periodically shill for them here on HN! Their market access diversity and rock bottom fees are very hard to beat. It should be possible to transfer a 401k in-whole with zero tax consequences nor booked trades.

TacticalCoder 2y ago
Yeah... At times I just take funds I like, read what they re actually made of, and replicate their holdings in IBKR. This way I dodge the fund's 0.5% annual fees and performance fees. 39 cents per transaction is hard to beat. The lump sum of cash on the sideline gets you 4.83% on IBKR (as long you have $100K+ on he sidelines). Cash secured puts you sell bring you yield on the USDs securing the put. Financial reports they make are top Noth and entirely configurable.

usaar333 2y ago

> the only year it actually lost money, was 2020 -and it has completely made up for that. It even made some money in 2008 How did you manage to not lose money in 2022? Almost every asset class was negative then.

pc86 2y ago
Most people just look at the balance and forget (in the self-preservation, "I want to be right" kind of forgetting) that they contribution $20k+ that year so unless you've got a multi-million dollar 401(k) or the market was down 10%+ across the board you're very likely to see more on December 31st than was there January 1st regardless.
- ghaff 2y ago
  I'm not sure that's quite fair. Unless it were 2001 or 2008 people look at their balances and see they're generally up unless they made some big gamble and at least unconsciously conclude they probably did as well as they reasonably could. But that may be what you're saying. Worrying about a percent here or there probably isn't worth it for most people.
  - pc86 2y ago
    We're saying the same things, I just meant you could actually lose a lot of money but see your balance go up, especially with smaller portfolios. As your portfolio gets bigger it's less likely to happen because eventually a single-digit loss over the course of a year might be enough to wipe out more than the max contribution.
    - ghaff 2y ago
      Yes. Even if your overall balance is going up, it makes sense to keep your eye on doggy investments. I really cleaned shop a couple years ago and I'm glad I did.