Read These Next
Do you know how hard your money worked for you in 2014?
If not, it’s time to do a 15-minute checkup of your investments and make some plans for 2015.
Check out the video below as Money Talks News founder Stacy Johnson explains the easy way to do an annual investment review. Then, keep reading for more details on each step.
Step 1: Check your performance
The first thing to do is pull out recent statements for all your investments, including retirement plans such as IRAs and 401(k)s, or check them online. If you don’t have a recent paper statement or online access to your accounts, you may have to wait until the year-end statement arrives in the mail.
But let’s assume you have your statements in front of you. The important number you are searching for is your fund performance. Once you find that number, your next question should be: “Is that good?”
To find an answer, you’ll need to compare your funds with indexes that include similar investments.
For example, if your funds are invested in large-company stocks, you might compare your performance with the S&P 500. (As I write this, it’s up about 9 percent this year.)
I know it would be easier if I could simply tell you that if you hit a certain percentage, your investments had a great year. However, anyone who boils your fund performance down to such basic terms is doing you a disservice. You need to have an apples-to-apples comparison. That means comparing bond funds to bond funds, balanced funds to balanced funds and so on.
Don’t freak if your fund is a few percentage points off the returns offered by indexes or similar funds, but if your large-cap fund earned 5 percent this year when the S&P 500 earned 28 percent, that should be a red flag. (See: “Why You’re Stressed About Your 401(k) and How to Get Over It.”)
Step 2: Review the fees
After you check out fund performance, the next step is to look at what you paid to achieve it. In other words, fees. If you’re investing in mutual funds, this should be listed on your statements as the expense ratio. If for some reason you don’t find it on your 401(k) paperwork, you may need to call your employer’s HR office and ask.