By account balance:

Here is how investors with the following 401K balances fared last year. It should be noted that the percentages include new contributions.

• Balance less than $10,000: gained an average of 43%
• $10,000-$50,000: broke even
• $50,000-$100,000: loses averaged 15%
• $100,000-$200,000: loses averaged 21%
• More than $200,000: loses were more than 25%

I was surprised that the wealthy were hit disproportionately harder, but it makes sense if you give it a second thought. People with a low balance could more easily offset fund performance with new contributions.

It could also mean that new investors are taking a more cautious approach, choosing to invest more heavily in bonds than stocks. Hopefully that’s not the case, as being overly cautious is a good way to cheat yourself out of higher returns in the long term.

By Risk

In 2008:

• The average US stock fund fell by 38%
• The average US bond fund fell by 8%
• The average target date fund for 2010 lost 22%
• The average target date fund for 2040-2045 lost 38%

In short, there was no safe harbor last year. It’s not surprising that stocks fell so much, but it’s unusual that even the conservative bonds fell by so much.

In case you don’t know, “target date funds” are a kind of automated retirement fund. You invest your money in a fund for the year you want to retire, and they manage you investments, automatically adjusting your asset allocation and the mixture of stocks.

I’ve never been a big fan of them, because I don’t see how you can group so many different people with different strategies together. I’d rather take control of my own portfolio.

The “safe” 2010 fund lost 22% (worse than bonds), and that the 2040 funds lost the same amount as stocks. That only solidifies my stance against target date funds. No one will care for your money as much as you! Don’t give up control.

By Age and Job Tenure

It’s no surprise that older investors were hit harder. Here is how different age groups fared last year.

• Ages 25-34:
  • Less than 5 years on the job: gained 25%
  • Between 5-10 years: gained 5%
• Ages 35-44:
  • Less than 5 years on the job: gained 11%
  • More than 10 years: lost 21%
• Ages 45-55:
  • Less than 5 years on the job: gained 3%
  • Between 5-9 years: lost 18%
  • Between 20-29 years: lost 26%
• Ages 55-64:
  • Less than 5 years on the job: gained 1%
  • More than 20 years: lost 25%
  • On average, someone with 20-29 years experience will have to work (and contribute to their 401K) for an extra 21-25 months just to break even.

It’s not surprising that the impact went up with age, but I’m surprised that the amount of time on the job had such a big impact.

Summary

It was good to be a young, low-worth investor last year. Your net returns may have been positive, but if not, they were at least less negative than everyone else.

Not only that, but young investors have the most time to invest, and they’re in a unique position. We’re starting to save for retirement at a time when the market is at historic lows. It’s an opportunity.

I can’t help but feel guilty for complaining about my terrible returns last year. In spite of my funds losing more than 40%, I still ended up with a net return of +45%, thanks to my contributions and company matches.

It all goes to show that even in a down market, you still need to keep saving money for retirement. Giving into fear – and moving everything to bonds or pulling out altogether – may only make things worse in the long run.