Risk: Defining the measurements [Alpha, Beta, Mean annual return, R-squared, Standard deviation, Sharpe ratio] for mutual funds

I like to use Google Finance as a general tool to track my portfolio and research equities. Yahoo! Finance and my online brokerage accounts offer the same features to track a portfolio, but I basically use Google online services as my default for everything so, hey, why not for tracking my finances too I figure. Google Finance presents the risk numbers for mutual funds, but I only know these metrics in a very general sense. Occasionally I'll check them out, but I nearly pay no mind to them at all. To get more serious about my finances I want to know the details of these metrics in, well, much more detail. This would allow me to more effectively use these risk evaluators in a substantive way when managing my personal financial portfolio.

For mutual funds Google Finance displays the following risk measurements (the first 5 are the more common technical risk ratios):

• Alpha*
• Beta*
• R-squared*
• Standard deviation
• Sharpe ratio
• Mean annual return

* Against standard index, typically the S&P 500

But what are the exact details of these metrics, how are they calculated, and what could you do with this information? I don't know really so I'll research them and note the salient bits of what I find for each here.

First off a general definition of risk from the investor perspective. Investopedia defines risk as "the chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviations indicates a high degree of risk." And they have a quick video on this at Investopedia: "Understanding Risk And Time Horizon."

Risk Measurement Points Explained

Alpha

From Wikipedia Alpha (investment): Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances. It can be shown that in an efficient market, the expected value of the alpha coefficient is zero. Therefore the alpha coefficient indicates how an investment has performed after accounting for the risk it involved:

• α_i < 0: the investment has earned too little for its risk (or, was too risky for the return)
• α_i = 0: the investment has earned a return adequate for the risk taken
• α_i > 0: the investment has a return in excess of the reward for the assumed risk

A positive alpha of 1.0 means the fund outperformed the benchmark by 1%, a negative alpha of 1.0 means the fund underperformed the benchmark by 1%. So the financial website Seeking Alpha states its goal clearly in its domain name.

Beta

From Wikipedia the Beta (β) of a stock or portfolio is a number describing the relation of its returns with those of the financial market as a whole. An asset has a Beta of zero if its returns change independently of changes in the market's returns. A positive beta means that the asset's returns generally follow the market's returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. A negative beta means that the asset's returns generally move opposite the market's returns: one will tend to be above its average when the other is below its average.

Published betas typically use a stock market index such as S&P 500 as a benchmark.

By definition, the market itself has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the macro market. A stock whose returns vary more than the market's returns over time can have a beta whose absolute value is greater than 1.0. A stock whose returns vary less than the market's returns has a beta with an absolute value less than 1.0.

A stock with a beta of 2 has returns that change, on average, by twice the magnitude of the overall market's returns (i.e. when the market's return falls or rises by 3%, the stock's return will fall or rise by 6% on average). Beta can also be negative, meaning the stock's returns tend to move in the opposite direction of the market's returns. A stock with a beta of -3 would see its return decline 9% when the market's return goes up 3%, and would see its return climb 9% if the market's return falls by 3%.

Higher-beta stocks tend to be more volatile and therefore riskier, but provide the potential for higher returns. Lower-beta stocks pose less risk but generally offer lower returns.

Relation between alpha and beta

An investor can use both alpha and beta to judge a manager's performance. If the manager has a high alpha and a high beta, an investor may not find that acceptable. This may be too risky for an investor who feel they might need to withdraw their money before a multi-year holding period. Thus investment managers who employ a strategy which is less likely to lose money in a particular year are often chosen by those investors who feel that they might need to withdraw their money sooner

R-squared

Investopedia explains 'R-Squared' as a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. For fixed-income securities, the benchmark is the T-bill. For equities, the benchmark is the S&P 500.

R-squared values range from 0 to 100. An R-squared of 100 means that all movements of a security are completely explained by movements in the index. A high R-squared (between 85 and 100) indicates the fund's performance patterns have been in line with the index. A fund with a low R-squared (70 or less) doesn't act much like the index.

A higher R-squared value will indicate a more useful beta figure. For example, if a fund has an R-squared value of close to 100 but has a beta below 1, it is most likely offering higher risk-adjusted returns. A low R-squared means you should ignore the beta.

Standard deviation

From the Yahoo! Risk Overview page the standard deviation is a statistical measure of the range of a fund's performance, and is reported as an annual number. When a fund has a high standard deviation, its range of performance has been very wide, indicating that there is a greater potential for volatility.

Approximately 68.3% of the time (2 of 3 occurrences), the total returns of any given fund are expected to differ from its mean total return by no more than plus or minus the standard deviation figure. About 95.4% of the time (19 of 20 occurrences), a fund's total returns should be within a range of plus or minus two times the standard deviation from its mean.

Standard deviation alone cannot be used to gauge risk. By only looking at the standard deviation one could conclude that a fund Y is more risky when compared to a fund X because Y has a higher standard deviation. But standard deviations by themselves are not necessarily a meaningful measure. To interpret risk you could divide the standard deviation by the average return and this could show fund X as more risky than fund Y depending on the avg return.

Sharpe ratio

Yahoo! Finance states the Sharpe ratio as a measure of a fund's excess return relative to the total variability of the fund's holdings. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance. It was developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk free rate (i.e. 10-year U.S. Treasury bond) from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.

A Sharpe ratio of 1 or better is considered good, 2 and better is very good, and 3 and better is considered excellent ^{[Investopedia ref]}.

As it is a dimensionless ratio normal people (like me) will find it difficult to interpret Sharpe Ratios of different investments. For example, how much better is an investment with a Sharpe Ratio of 0.6 than one with a Sharpe Ratio of -0.1?

Mean annual return

From Wikinvest the mean annual return is the return an investment provides over a period of time, expressed as a time-weighted annual percentage. Sources of returns can include dividends, returns of capital and capital appreciation. The rate of annual return is measured against the principal amount of the investment and represents a geometric mean rather than a simple arithmetic mean.

Annual return is the de facto method for comparing the performance of investments with liquidity, which includes stocks, bonds, funds, commodities, and some types of derivatives.

US mutual funds use SEC form N-1A to report the average annual compounded rates of return for 1-year, 5-year and 10-year periods as the "average annual total return" for each fund. The following formula is used:

P(1+T)n = ERV

Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years

ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year periods (or fractional portion).

Both arithmetic and geometric average rates of returns are averages of periodic percentage returns. Neither will accurately translate to the actual dollar amounts gained or lost if percent gains are averaged with percent losses. A 10% loss on a $100 investment is a $10 loss, and a 10% gain on a $100 investment is a $10 gain. When percentage returns on investments are calculated, they are calculated for a period of time – not based on original investment dollars, but based on the dollars in the investment at the beginning and end of the period. So if an investment of $100 loses 10% in the first period, the investment amount is then $90. If the investment then gains 10% in the next period, the investment amount is $99.

A 10% gain followed by a 10% loss is a 1% loss. The order in which the loss and gain occurs does not affect the result. A 50% gain and a 50% loss is a 25% loss. An 80% gain plus an 80% loss is a 64% loss. To recover from a 50% loss, a 100% gain is required. The mathematics of this are beyond the scope of this article, but since investment returns are often published as "average returns", it is important to note that average returns do not always translate into dollar returns.

Concluding Comments

After researching these terms I feel better about knowing the specifics of these risk metrics and using them to some degree when I evaluate funds.

But I must say not quite sure what to make of standard deviation. How could or should it be utilized? What is considered a high standard deviation number? What is considered a low number? Is there an overall market average that I can compare a funds std dev against? Is the Google Finance reported standard deviation number a percentage? Is it OK to compare standard deviation across two different funds (i.e. a tech fund and a utility fund)?

From Wikipedia on the standard deviation there is this line: "Approximately 68.3% of the time (2 of 3 occurrences), the total returns of any given fund are expected to differ from its mean total return by no more than plus or minus the standard deviation figure."

Does this mean if a fund currently priced at $75/share and has a standard deviation of '5' (as reported on Google Finance) that I can say that share was between $95 and $105 per share ~66% of the time over the past 12 months?

As an example in the month of February 2012 let's compare MSFT and NFLX. Below is a chart comparing the two, red is NFLX:

Generally MSFT was at ~$30/share and NFLX ~$120/share over the month of February. MSFT had an up trend while NFLX had a downward trend.  Just purely from my observations NFLX had much more volatility in February. According to MarketVolume MSFT had a 20-day Standard Deviation of 0.64. By comparison NFLX had a 20-day Standard Deviation of 5.61 So is NFLX nearly 10 times more risky than MSFT? NFLX was more volatile and therefore more risky but I don't think it was 10 times more risky, so what can I make of these reported standard deviation numbers? Also, can I compare this standard deviation number from MarketVolume to the number reported on Google Finance? Google Finance does not report a standard deviation for MSFT or NFLX. Is standard deviation only useful for mutual funds?

401k fund fees and expenses, details on what they are

Generally I buy a fund based on reputation and historical performance. I'm pretty fluid on what I pick unless I want a bond fund or a fund that focuses on dividends. I know funds have expenses for operating fees and such but I never paid much mind to them and never really knew what they were. As I've decided 2012 is the year I start getting more serious with my finances, and expense ratios are an important aspect of mutual funds, I need to understand in more detail the impact of these expenses on my bottom line before I invest in a fund.

Information about the expenses a fund needs to provide and what actual expense numbers are is widely available:

• SEC page defining Mutual Fund Fees and Expenses
• SEC page on Calculating Mutual Fund Fees and Expenses, use this page to figure out the costs of owning any mutual fund

My interest in understanding fund fees and expenses started because I felt my current employer's 401k plan offers funds that have higher fees than my previous employer. I wanted to quantify this so I figured comparing two identical funds offered in each of my plans would be a good start to understanding fees and expenses between the two. My assumption is that the expenses in these funds would be roughly similar. The two similar funds I compared:

• FFKEX: FIDELITY FREEDOM K 2030 FUND (401k plan managed by Fidelity)
• FTFEX: FIDELITY ADVISOR FREEDOM 2030 C (401k plan managed by Paychex)

From the information available on these funds at respective websites (Fidelity and Paychex) these were the fees listed:

• Expense Ratio/Gross Expense Ratio
• Net Expense Ratio
• 12b-1 Fee
• Management Fee
• Redemption Fee
• Other Expenses

I'll review specific numbers later but I want to get the definitions of these fees clear first. The description of the Expense Ratio/Gross Expense Ratio and Net Expense Ratio and their comparison is from The Motley Fool Wiki

Gross Expense Ratio

The gross expense ratio of a mutual fund represents the cost of running a fund as compared to the profit earned by the fund. Gross expense ratio figures consider all of the expenses of a fund, including administrative and accounting costs and fees associated with investments made by the fund. The Financial Industry Regulatory Authority, or FINRA, requires that all mutual funds publish gross expense ratios for the general public. These figures often appear on mutual fund websites and in published material such as pamphlets.

Net Expense Ratio

Net expense ratio equals the gross expense ratio of a mutual fund minus acquired fee funds and any fee waivers or expense reimbursements made to investors by the fund. Acquired fund fees constitute the costs, such as the expense ratio, of mutual funds or similar securities and commodities in which your mutual fund invests. Net expense ratio affects shareholders directly but gross expense ratio does not. However, FINRA doesn't require funds to publish this information for the public.

Gross Expense Ratio vs. Net Expense Ratio

The primary difference between gross expense ratio and net expense ratio lies in their impacts upon the investor. Gross expense ratio affects only the mutual fund itself. Net expense ratio reflects the amount of money paid by each investor for fund operating costs when compared to profit from the investment. The difference between these two ratios comes down to how much of its own operating costs a fund absorbs and how much of those costs it charges investors.

The gross expense ratio sums all costs and expenses into a single number, so this is the most important one. For example if a fund has an expense ratio of 1.0% the fund will pay itself 1.0% of the total money in the fund every year regardless of fund performance.

12b-1 Fee

Investopedia explains the '12B-1 Fee' is annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered an operational expense and, as such, is included in a fund's expense ratio. It is generally between 0.25-1% (the maximum allowed) of a fund's net assets. The fee gets its name from a section in the Investment Company Act of 1940.

Back in the early days of the mutual fund business, the 12b-1 fee was thought to help investors. It was believed that by marketing a mutual fund, its assets would increase and management could lower expenses because of economies of scale. This has yet to be proved. With mutual fund assets passing the $10 trillion mark and growing steadily, critics of this fee, which today is mainly used to reward intermediaries for selling a fund's shares, are seriously questioning the justification for using it. As a commission paid to salespersons, it is currently believed to do nothing to enhance the performance of a fund.

An article in WSJ "What Exactly Are 12b-1 Fees, Anyway? Regulators fret that too many investors don't understand what they're paying. Here's where your dollars are going."

Management Fee

The Motley Fool states the management fee or investment advisory fee is the money necessary to pay the manager(s) of the mutual fund. On average, this fee is about 0.50% to 1.0% annually of the fund's assets, and is necessary to make sure that the manager of the fund can be very well-dressed at all times and is able to go on good vacations.

Redemption Fee

401k-comparisons.com states that a redemption fee is another type of fee that some funds that are used in a 401k plan charge their shareholders when the shareholders redeem their shares. Although a redemption fee is deducted from redemption proceeds just like a deferred sales load, it is not considered to be a sales load. Unlike a sales load, which is generally used to pay brokers, a redemption fee is typically used to defray fund costs associated with a shareholder's redemption and is paid directly to the fund, not to a broker. The SEC generally limits redemption fees to 2%.

Other Expenses

From the SEC page on Mutual Fund Fees and Expenses: Included in this category are expenses not included in the categories "Management Fees" or "Distribution [and/or Service] (12b-1) Fees." Examples include: shareholder service expenses that are not included in the "Distribution [and/or Service] (12b-1) Fees" category; custodial expenses; legal expenses; accounting expenses; transfer agent expenses; and other administrative expenses.

Reviewing and understanding 401k fees and expenses, fees on the Paychex 401k managed plan are extremely high

I'm concerned about high fees in my 401k funds managed through Paychex. Before I start depositing more money in this 401k plan I want to compare it to my prior 401k.

I don't have exact overlapping funds between my 401k with Employer A (managed by Fidelity) and my 401k with Employer B (managed by Paychex), but there is one fund that I think is nearly the same. The Employer A Fidelity managed 401k plan offers FIDELITY FREEDOM K 2030 FUND (FFKEX). The Employer B Paychex managed 401k plan has FIDELITY ADVISOR FREEDOM 2030 C (FTFEX). Finding expenses and fees is a bit challenging as the numbers are typically not broadcasted, but they have to be disclosed by law. The respective websites, www.401k.com (this points to Fidelity) and benefits.paychex.com, have this information, but it is not consolidated on a single page so it does take a little digging in each fund prospectus to get the numbers.
I chose these two to compare as I think they are basically the same or very similar type of funds. Both are managed by Fidelity, both have essentially the same goals and holdings:

FFKEX Description - Fidelity 401k

FTFEX Description - Paychex 401k

The investment seeks high total return until its target retirement date. The fund invests in a combination of underlying Fidelity domestic equity funds, international equity funds, bond funds, and short-term funds using a moderate asset allocation strategy designed for investors expecting to retire around the year 2030. It uses an asset allocation strategy that becomes increasingly conservative until it reaches 15% in domestic equity funds, 5% in international equity funds, 40% in bond funds, and 40% in short-term funds (approximately 10 to 15 years after the year 2030). Top 10 holdings Fid Series Investment Grade Bond F Fid Series All-Sector Equity F Fid Series Large Cap Value F Fid Disciplined Equity F Fid Series High Income F Fid Series Commodity Strategy F Fid Growth Company F Fid Series Int Growth F Fid Series Int Value F Fid Series 100 Index

The investment seeks high total return with a secondary objective of principal preservation. The fund primarily invests in a combination of Fidelity domestic equity funds, international equity funds, bond funds, and short-term funds using a moderate asset allocation strategy designed for investors expecting to retire around the year 2030. It uses an asset allocation strategy that becomes increasingly conservative until it reaches 15% in domestic equity funds, 5% in int equity funds, 40% in bond funds, and 40% in short-term funds (approximately 10 to 15 years after the year 2030). Top 10 holdings Fid Series Investment Grade Bond Fid Series All-Sector Equity Fid Series Large Cap Value Fid Series High Income Fid Series Commodity Strategy Fid Advisor Growth & Income I Fid Advisor Large Cap I Fid Series Int Growth Fid Series Int Value Fid Series 100 Index

And their chart comparisons are nearly identical:

FFKEK (blue) and FTFEX (red) comparison chart

Therefore I would imagine their fee totals would be close to the same number across my two 401k plans.

Wrong.

From the www.fidelity.com site where I access my 401k from Employer A, the fees for FFKEX are listed as:

FIDELITY FREEDOM K 2030 FUND (FFKEX) - Fidelity
Fees:
   Management Fee 0.00%
Expenses & Fees:
   Expense Ratio as of 05/28/2011 0.61% ($6.10 per $1000)

I think 0.61% is a reasonable number but I actually don't know. I would expect to see fees under 1% and it is under 1% by quite a bit. And the www.401k.com site conveniently has this pertinent information right along side these fee numbers:

For a mutual fund, the expense ratio is the total annual fund or class operating expenses (before waivers or reimbursements) paid by the fund and stated as a percent of the fund's total net assets. Where the investment option is not a mutual fund, the figure displayed in the expense ratio field is intended to reflect similar information. However, it may have been calculated using methodologies that differ from those used for mutual funds. Mutual fund data has been drawn from the most recent prospectus. For non-mutual fund investment options, the information has been provided by the trustee or plan sponsor. When no ratio is shown for these options it is due to the fact that none was available. Nevertheless, there may be fees and expenses associated with the investment option.

Keep in mind the cumulative effect of fees and expenses can substantially reduce the growth of your retirement savings,but is only one of many factors to consider when you decide to invest in an option. Visit the Department of Labor's website for an example of the long-term effect of fees and expenses.

Now let's check out the fund fees for FTFEX, which I believe is a roughly similar Fidelity fund offered through Paychex 401k services. I obtained this information through the paychex.com website in the Retirement Services portion of their website:

FIDELITY ADVISOR FREEDOM 2030 C (FTFEX) - Paychex
Fee Summary
  Gross Expense Ratio (03/31/2011). 1.26%
  Net Expense Ratio ............... 1.26%
  Management Fee ..................    NA
  12b-1 Fee ....................... 0.50%
  Other Expenses .................. 0.76%
  Redemption Fee ..................    NA

The total FTFEX fees are 1.26% ($12.60 per $1000). This is over 2 times the total fee that my Fidelity managed 401k plan applies for FFKEX which is essentially the same fund. The 'Other Expenses' line item alone is more than the Fidelity entire fees. What are 'Other Expenses' exactly? And I don't even know what a "12b-1" is but it will set me a back a few bucks at some point in time. I know these are not the same exact funds but this difference is dramatic and has to be very high compared to the industry average.  Time to do more digging into the details of these fees and why Paychex managed 401k fund fees seem to be at such high levels.

401k Holdings with "Employer B" [2/1/2012]

The remainder of my 401k savings are in my current employers 401k plan which is managed by Paychex.  My current balance allocation:

RERAX	15%	American Funds Europacific Growth R1
ECHIX	14%	Eaton Vance High Income Opportunities C
ECSMX	14%	Eaton Vance Small Cap C
KAUCX	25%	Federated Kaufmann C
FTFEX	15%	Fidelity Advisor Freedom 2030 T
OIGCX	16%	Oppenheimer International Growth C

Full list of currently available investment choices in this plan:

RBFAX	American Funds Bond Fund Of America R1
RERAX	American Funds Europacific Growth R1
RGAAX	American Funds Growth Fund Of America R1
RNWAX	American Funds New World R1
ECHIX	Eaton Vance High Income Opportunities C
ECGFX	Eaton Vance Multi Cap Growth C
ECSMX	Eaton Vance Small Cap C
FUSCX	Federated Fund For Us Government Securities C
ISCCX	Federated International Small Mid Cap Company C
KAUCX	Federated Kaufmann C
FDTFX	Fidelity Advisor Freedom 2020 T
FTTWX	Fidelity Advisor Freedom 2025 T
FTFEX	Fidelity Advisor Freedom 2030 T
FIPCX	Fidelity Advisor Inflation Protected Bond C
FNICX	Fidelity Advisor New Insights C
FDAXX	Fidelity Prime Fund; Daily Money Class
FRVFX	Franklin Small Cap Value C
HDGRX	Hartford Dividend & Growth R3
OIGCX	Oppenheimer International Growth C
OMSCX	Oppenheimer Main Street Select C

My 401k Holdings with "Employer A" [1/31/2012]

The bulk of my 401k savings remain in my previous employers' 401k plan which is managed by Fidelity.  My current balance allocation:

FCNKX	28%	Fidelity Contrafund - Class K
PTTRX	18%	PIMCO Total Return Inst CL
FFKEX	14%	Fidelity Freedom K 2030 Fund
MSSGX	13%	Morgan Stanley Institutional Small Company Growth Fund Class I
FSEVX	12%	Spartan Extended Market Index Fund - Fidelity Advantage Class
FKTHX	9%	Fidelity Freedom K 2035 Fund
-----	4%	Fidelity Managed Income Portfolio II Class 2
FFKHX	1%	Fidelity Freedom K 2050 Fund
FDIKX	1%	Fidelity Diversified International Fund - Class K

Full list of currently available investment choices in this plan:

EILVX	Eaton Vance Large-Cap Value Fund Class I
-----	Disney Stock Fund
FCNKX	Fidelity Contrafund - Class K
-----	Fidelity U.S. Equity Index Commingled Pool Class 1
CRIMX	CRM Mid Cap Value Instl CL
FSEVX	Spartan Extended Market Index Fund - Fidelity Advantage Class
VMGRX	Vanguard Mid Cap Growth
GSSIX	Goldman Sachs Small Cap Value Fund Institutional
MSSGX	Morgan Stanley Institutional Small Company Growth Fund Class I
FDIKX	Fidelity Diversified International Fund - Class K
FDIKX	Fidelity Diversified International Fund - Class K
FSPNX	Spartan International Index Fund - Institutional Class
MRLAX	Morgan Stanley Institutional Global Real Estate Fund Class I
FFKBX	Fidelity Freedom K 2000 Fund
FFKVX	Fidelity Freedom K 2005 Fund
FFKCX	Fidelity Freedom K 2010 Fund
FKVFX	Fidelity Freedom K 2015 Fund
FFKDX	Fidelity Freedom K 2020 Fund
FKTWX	Fidelity Freedom K 2025 Fund
FFKEX	Fidelity Freedom K 2030 Fund
FKTHX	Fidelity Freedom K 2035 Fund
FFKFX	Fidelity Freedom K 2040 Fund
FFKGX	Fidelity Freedom K 2045 Fund
FFKHX	Fidelity Freedom K 2050 Fund
FFKAX	Fidelity Freedom K Income Fund
-----	Fidelity Managed Income Portfolio II Class 2
PTTRX	PIMCO Total Return Inst CL
FXSTX	Spartan U.S. Bond Index Fund - Institutional Class
-----	Fidelity U.S. Treasury Money Market Fund

401k balance, how my balance compares to others in my peer group

I think I have a good amount of money invested in my 401k. I have contributed to my 401k over the years and many times I have contributed the maximum amount. But is it enough at this point in my life? And what should my ultimate goal be anyway?

As a start I'd like to benchmark my 401k balance against others. Below are some of the pages I reviewed that had relevant numbers and statistics. From the data on these two sites I am way above the average 401k balance:

• Compare Our 401k Balances With Others In America [MoneyNing.com]
• What are Average Retirement Savings for Different Age Groups? [401kPlanning.org]

However, the above reports are broad and they lumped in all income levels. I'd like a report that compares me against a similar cohort. I found this article in US News & World Report from August 2007 (still applicable in 2012?) that broke out the numbers in a more granular and revealing manner for me:

• How Your Nest Egg Compares to Your Peers [US News & World Report]

For my age group and income level I am above average but under the median (under by less than 10%). I'd like to be above that median but I'm nearly right at it and should clear it in a year or two I hope while staying in the same cohort.

So benchmarking puts my 401k in a generally good spot at this point in my life.  My next steps are to set some future 401k targets.

I use Quicken (meh) and my forced upgrade is coming, grumble

I've been using Quicken since 1997 and generally I am very happy with the software. I am currently using Quicken Premier 2009. There really is no other software that allows me to consolidate all my finances in one single view. Barron's calls Quicken "The Best Money Manager" and the story's opening sentence reads "if you're reading Barron's, you need Quicken to help manage your finances". I read Barron's, 'nuff said I suppose. My financial holdings are not massive but I have enough accounts in different places that Quicken is very useful for me. It does connect and download data from all my financial institutions with little to no problems. Plus it rolls up my net worth as a single number. And since I've been using it for nearly 15 years I can see my net worth over time (it's been growing) among other financial and budget reports. To keep your money organized and do decent personal financial planning you need Quicken.

Although I recommend Quicken, Quicken is dying. Every year Quicken releases an updated version and as far as I can tell there is little change between versions. I really have no desire to upgrade and waste $50 or more to get no new features. Intuit is smart/devious in that they 'sunset' their software. Intuit only supports the current and previous three versions with their online features. Older versions will function, but they cannot download your financial data from the internet. So Intuit basically handicaps their software by giving it a maximum of a 4 year lifespan thus forcing their users to give them money for an upgrade. My version is on the cusp of this 'sunset'. Here's what I get every time I open Quicken:

Alert: Your Quicken 2009 Online Services End April 30, 2012.

You will no longer be able to do the following in your version of Quicken 2009:

• Get automatic Quicken account updates reflecting the latest activity from your banks, credit cards, credit unions, or investment accounts
• Pay bills, get stock quotes, or read news headlines from within Quicken
• Get customer support online or by phone

To continue using these services and get access to the latest tools and enhancements, you need to upgrade to Quicken 2012.

I need the online features Quicken offers to manage my money so I will be forced to update. I won't think of this as an upgrade as there seems to be no compelling new features but more of a subscription renewal. I'd look at alternatives but basically there are none.

Know of any coupon codes I can use to get the cost under $50 for the upgrade?

My panoply of online banking sites: TD Ameritrade, Fidelity, Chase, HSBC....

I have many online banking accounts across which I keep my money and various financial vehicles. I use the online sites for TD Ameritrade, Fidelity, Chase, PayPal, and HSBC among others. I have opened multiple accounts over the years as I have been offered deals to do so. One had a high APY for a year, another offered a 0% interest credit card for 18 months if I opened a savings account, another had a $250 cash bonus for opening an account and so on. I also bought mutual funds directly from Vanguard and Dodge & Cox so I have accounts on their sites although I can't say I use them for day to day banking. PayPal used to offer a great APY (they're a money market basically) but now the rate is crap just like everybody else's even though I do still have a bit of cash in there.

The sites I primarily use are Chase and Fidelity. I'm generally happy with these sites and how they allow me to control my finances.

Current Financial Corpus as of January 25th, 2012

Not comfortable listing dollar amounts, but here's the executive summary of where I have my money as of today to get this blog underway. The amount of money I have in each is in order from most to least, with stocks the lowest since that's gambling:

• 401k: Two accounts, one from a previous employer and one with current employer.
• Mutual Funds: DODGX, DODFX, VDIGX, VWELX 
• Cash: Spread between a couple checking accounts, money markets, and saving accounts 
• Individual Stocks: GOOG, BAC, NFLX 

Allocation as percentage of my money that's in each:

• 401k: 67%
• Mutual Funds: 16%
• Cash: 14%
• Individual Stocks: 3%

Financial Planning? Time for me to get a bit more serious about this in 2012...

I currently have a job, I have no debt, and I have some money. I have money saved in various financial vehicles. Are they doing well? What's the best thing I should be doing with my money? When is a good time to buy or sell funds? What type of funds are best for me? What are the tax ramifications of the different things I'd like to do? Should I roll over a 401k into an IRA? What should be my financial goals? Would working with a financial planner be worthwhile for me and worth the cost?

I'm looking for answers to these questions. I have been my own financial planner and never thought too deeply about these things. Not much thought was needed since I am saving and things have been OK financially for me as far as I can tell. I traded stocks and got crushed in the tech bubble. Since then I've been passive on what I'm doing with my savings; generally I'm risk averse.

I am planning on being more proactive with my finances from 2012 onward. This blog will help me organize and track my ideas and analyze the results my actions.