Are Your Friend’s Investments Performing Better Than Yours?
May 10, 2007
Are your investments doing better or worse than your friends? Maybe you don’t want to know.
Comparing Investment Returns
There are two money savvy guys at work that I like to talk business and investing with. I discovered yesterday they had a bet on who between the two of them would reach $1 million first. I also found out that both of them were out-performing me in our 401k plan. One guy, Scott, had a 20% return over the last 3 years, the other one, Dan, a 15% return. I went home and logged on to find out that my 401k had a 3 year return of 12%.
Of course the next day I asked for more detail on the investment strategy they’d been following. Scott had dumped all his 401k money into our company stock a few years ago and rode it as the stock price climbed. Now he’s out of the company stock, back into index funds.
Our 401k plan has pretty decent options, with about 30 different funds to choose from. Dan had taken advantage of some of the high performing international funds we have available, investing heavily in those for the last several years.
My work friends have outperformed me because they were willing to take more investing risks. As you can see from the breakdown of my 401k plan below, I don’t hold any company stock and only 19% in international stocks:
22% – Vanguard Total Bond Index
59% – Vanguard Institutional Index
7% – Dodge & Cox International Stock
12% – American Century International Growth
My investment elections are based on the best options for diversification across the funds in our 401k, 403b, & IRAs. If I would have invested in our company stock or heavily in international funds I could have matched their returns but that level of risk doesn’t fit with my allocation & diversification plan.
Hearing their returns makes me wonder if my allocations are too conservative for a 29 year old with a long time frame. On the other hand, I don’t want to go around chasing performance. I hopefully learned my lesson about that during the dot com bust.
Do you share your investment performance with friends, family, and co-workers? If so, does it tend to make you more conservative or more risky in your investments?
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