Frequent reader Doobie emailed yesterday to pose this question:
What’s considered a decent rate of return for a stock/fund/etc? I always wondered that when I look at my 401K’s performance. I know it’s good when I’m not losing money, but even when it’s making money I’m trying to find a decent benchmark as to what’s good, what could be better, and what’s downright impressive. And why do I get the feeling there’s no easy answer to this?
I pointed Doobie towards the Yahoo Finance’s performance information for stocks and funds. Here’s an example for Vanguard 500 Index Fund (VFINX). The “Vs. Benchmarks” section provides comparisons between the fund’s performance and the category average as well as the associated index.
Doobie followed with:
I was actually more concerned about the performance of my whole portfolio. I got a 10.0% ROR overall last year
which I at first thought was pretty good, now I’m having second thoughts. Guess I’ll have to weed out the poor performers.
10% return is nothing to be bummed about. It didn’t quite match the S&P 500, but if you’re investing throughout the year, you end up buying as the market rose, lowering your total rate of return but reducing risk. Even if there were no additions to the portfolio throughout the year, 10% is still very respectable, and probably represents the diversity of the holdings.
Feel free to leave any more thoughts for Doobie.