Question: “My current 401(k) is only worth about $200,000 and I’ve lost about 23% in the last couple of years. I’m trying to make that up but my employer is not giving me much help. Where should I turn for help with this? What should I be looking for? Is this just par for the course?”
Answer: The level of negative return you describe here is abnormal, says Robert Johnson, chartered financial analyst and professor of finance at Heider College of Business at Creighton University. And pros say that yes, you may want to get a financial adviser — likely someone on a per-project basis — to help you sort this out. You can find one at CFP Board, NAPFA or by using this free tool to get matched with fiduciary advisers, from our ad partner SmartAsset.
“One would almost have to try to underperform the markets over the past two years to earn that poor of a return and you’d have to have a large concentration in a single stock to have that result. According to BlackRock, over the past two years when looking at 13 asset classes, all have provided positive returns with the exception of developed market government debt which had a slight negative return in 2024 of -3.6%,” says Johnson.
Indeed, certified financial planner and chartered financial analyst Thomas Betros at D’Arcangelo Financial Advisors says no major asset classes have gone down in value over the past two years. “The S&P is up close to 48% over this period,” says Betros.
Since the market as a whole has been up for the past two years, you need to understand what your investment options are why you’re down. “You can’t turn back time. The key is to focus on the future and investing in things you understand,” says Jay Zigmont, certified financial planner and founder of Childfree Trust.
First up, revisit your investment strategy. “When markets go up like they have over the last two years, it’s a red flag if you have negative performance over the same period. While the investment strategy will likely need to be changed, you should not have an approach of making up for lost time by being more aggressive. This could expose your portfolio to more risk and higher potential losses if markets were to go south,” says Betros.
You will likely need an investment policy statement, says Johnson. “All investors should establish what is called an Investment Policy Statement and follow it. Investing without a plan is like driving without a roadmap or GPS. It’s a written document that clearly sets out a client’s return objectives and risk tolerance over that client’s relevant time horizon, along with applicable constraints such as liquidity needs and tax circumstances,” says Johnson.
To reduce risk in a retirement portfolio, Betros says the most obvious thing to do is introduce fixed income. “When stock markets go south, fixed income can typically provide a buffer for your portfolio, which will minimize losses. Fixed income encompasses bonds of all different kinds including government, corporate, municipal, inflation-protected, high yield, international and emergency market bonds,” says Betros.
Whether or not you work with a financial professional, Steven Conners at Conners Wealth Management recommends using exchange-traded funds. “ETFs don’t invest in one stock but a broader selection of stocks of a market or sector of the market. This way if you own the broad market over a decade or more, you should do well, although not in any way guaranteed,” says Conners.
What kind of financial adviser is right?
To help you with all of this, you should turn to a credentialed fiduciary financial adviser, pros say. “When hiring a financial adviser, the most important question to ask is if they’re a fiduciary. To truly get the best client service, the individual must be a fiduciary who puts their clients’ best interests first. If a potential adviser is not a fiduciary, look elsewhere,” says Johnson.
Chartered financial analysts are required to act as fiduciaries, as are certified financial planners who are engaged in financial planning. You can find an adviser at CFP Board, NAPFA or by using this free tool to get matched with fiduciary advisers, from our ad partner SmartAsset.
Based on your level of assets and the fact that they’re in a 401(k), your best bet is to work with an hourly or project-based adviser who can tackle specific questions you have and help you come up with a plan moving forward. This way, you’re not paying for ongoing portfolio management which you don’t need, given your allocation. Hourly advisers often charge between $200 and $500 per hour while project-based advisers can cost between $1,500 and $7,500 depending on the scope of work and complexity of your finances. When interviewing potential candidates, be sure to vet them with these eight questions.
Having a second financial professional, outside of your employer, can also assist you in understanding your losses and better plan for the future. “It doesn’t guarantee better performance, but it could help you understand what occurred and perhaps ways to avoid that in the future,” says Conners.
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