Best 401k investment options 2016
How do some of the most respected investors on the planet think Americans should be investing their money? NPR talked to three about what a retirement portfolio should look like. Instead of just investing in U. He suggests stocks from developed and emerging markets around the world. And he suggests owning real estate through a low-fee fund as a part of your portfolio.
In addition to traditional U. In his sample portfolio, he says, some of these slices of the pie will likely rise and fall and rise again at different times and at different rates. Best 401k investment options 2016 he says to rebalance at least once a year to maintain your target allocation. Fees can do terrible damage to your investment returns. Even in higher-risk, higher-return asset classes such as stocks you can only expect high-single digit or low double-digit returns over long periods of time.
So if you end up paying 1 best 401k investment options 2016 to a financial adviser, and then 1 percent to 2 percent on top of that in mutual fund fees and then adjust for inflation 2 percent to 3 percent a yearyou're losing half of your returns or more, Swensen says. The odds, he says, are overwhelmingly in favor of index funds. So Swensen says very-low-fee index funds make the most sense for individual investors. He says if you compare performance of higher-priced actively managed mutual funds to lower-cost index funds, "when you look at the results on an after-fee, after-tax basis over reasonably long periods of time," the odds, he says, are overwhelmingly in favor of index funds.
When it comes to investing, Swensen says, "there is no such thing as one size fits all. Essentially, what Swensen is saying is that when you're investing for long periods of time — 20 or 30 years, for example — you are likely to make more money holding a best 401k investment options 2016 portion of your portfolio in stocks or other assets with a high expected rate of return. That's because historically, stocks offer greater returns than "safer" alternatives such as U.
Treasury bonds over the long term. But in the short term, stocks tend to be much more volatile. So as people near retirement age, many investment advisers suggest shifting more assets to the "safer than stocks" category. If the stock market crashes and you need to be spending money out of your portfolio as income in retirement, you don't want to suddenly lose 20 or 30 percent of your savings and be forced to sell stocks at a low price.
If you're younger and stocks crash, you can just hang tight and wait for the market to recover. But it's not all about age. It's also about appetite for risk. Risk-averse investors may want to hold a combination of the model portfolio and cash, which will reduce overall risk," Swensen says.
As investors grow older, tolerance for risk may decrease. Each individual needs to find a portfolio that matches their risk preferences.
Gretchen Tai Courtesy of Gretchen Tai hide caption. Active management and fees. She says whether you go with active or passive management, try to keep the total fees you are paying in your portfolio at or below 0. That's half of 1 percent.
Many financial advisers charge twice that — on top of any mutual fund fees you're paying. But Tai says she doesn't think most people need financial advisers. But all of the best 401k investment options 2016 advisers and economists NPR interviewed said you don't want to overpay for a financial adviser.
Like Swensen, Tai advocates broader diversification than many individual investors often achieve. Given the current interest rate environment, Tai believes that "a more flexible approach" to the traditional age-based rules to bond allocation might be more appropriate.
So, Tai says her suggested portfolio is a good approach until you reach retirement age. At that point, she says, investors need to look at their nest egg: If it's big enough to live on along with Social Security, "then it's OK to reduce higher-risk assets such as stocks more quickly to 40 percent.
Jack Bogle Courtesy of Vanguard hide caption. Bogle says to invest through low-cost index funds. He created the first one after all. With an index best 401k investment options 2016 you're not paying people on Wall Street to pick stocks for you. Instead, you basically "own all of corporate America," he says — at least, a small slice. And over time, he says, low-cost index mutual funds outperform the vast majority of actively managed mutual funds. Picking winners with stocks is very hard to do, and for ordinary Americans, it just costs too much to invest that way, he says.
Keep your investment expenses under control," he says. Low costs make your task easier. One rule-of-thumb is to begin with a bond position similar to our age — 20 percent or less in bonds in our 20s, 80 percent bonds in our 80s — and then make adjustments based on your personal circumstances. Bogle says he's a fan of holding a mix of Vanguard's Intermediate- and Short-Term Bond Index Funds, though of course similar low-cost funds are available out on the market from other firms.
He also suggests investing a portion of your bond allocation in tax-exempt funds if taxes are a concern. If you're saving for retirement though in a pre-tax k account, this isn't a concern. Best 401k investment options 2016 says you can justify owning a larger portion of your assets in stocks best 401k investment options 2016 you consider that Social Security provides a revenue stream to you in retirement that's safe and stable, much best 401k investment options 2016 the Treasury bond category is in your investment portfolio.
So he says his basic "own your age in best 401k investment options 2016 approach is a good starting point. But if you're paying into Social Security with each paycheck, you can safely own more stock. So if you're 28 years old, you might decide to have, say, 10 or 20 percent best 401k investment options 2016 binary handel mit einer kostenlosen demo account no deposit and 80 or 90 percent in stock — depending on your risk tolerance.
Accessibility links Skip to main content Keyboard shortcuts for audio player. Facebook Twitter Flipboard Email. October 17, 4: David Swensen has made an average return of That gives him the best track record of any institutional investor around.
Gretchen Tai runs Hewlett-Packard's pension and k plans. She's got a great track record, too. Jack Bogle created the world's first index fund for ordinary people.