The S&P 500 gained 2.5 percent in the week ended Friday, Nov. 13, its first winning week since October, AP reported. On Friday itself, the index fell 0.40 percent, according to Reuters. A saver who logs in to a 401(k) this weekend may see a different number from either one. There are ordinary reasons for that.
The rule: a statement is a snapshot
A 401(k) is a container. It holds investments, and its value on any date is the value of those investments on that date.
A statement reports the balance as of one day, the day it is dated. It does not report the best day of the week or the average of the week. If the date falls on a Friday after a down session, the balance reflects that Friday.
This week shows how much the choice of day can matter. The S&P 500 closed at 7,592.40 on Thursday and at 7,561.67 on Friday, Reuters reported. A balance checked Thursday evening and the same balance checked Saturday morning would not match, even though the week as a whole was a gain.
The rule: a week has a starting point
A weekly gain is measured from the previous Friday's close to this Friday's close. A statement period usually runs on a different calendar. A saver comparing two statements is comparing two dates that may not line up with any week reported in the news.
So a 2.5 percent week is real, but it is one week. It is not the change since the last statement.
The rule: contributions and returns are different numbers
A contribution is money a saver puts in, usually from each paycheck. A return is what the investments do with the money already there. The balance on a statement combines the two.
Here is an example, with round numbers chosen for illustration only. Suppose an account held $10,000 in a fund that tracks the S&P 500 at the close on Friday, Nov. 6. A 2.5 percent gain over the week would add $250, for a balance of $10,250 a week later. If a $200 contribution arrived during the same week, the balance would read $10,450.
The statement shows $450 more. Only $250 of it is investment return. The other $200 came from the saver.
The same arithmetic runs the other way in a down week. A contribution can make a balance look steady even when the investments fell.
The rule: an account is not an index
A 401(k) usually holds more than one fund. A target-date fund, a bond fund or a fund holding foreign stocks will not match the S&P 500. This week the Dow rose 2.1 percent and the Nasdaq 2.3 percent, CNBC reported, and stock markets abroad moved by different amounts again. An account's result for the week is the sum of what each of its funds did, weighted by how much of the account each one holds.
What it means for a saver
The useful question on a statement is not whether it matches the week's headline. It is how the balance divides between what was put in and what the investments earned. Those are the two figures worth finding on any statement.
A single week, up or down, is one entry in a long record. For a saver years from retirement, the week of Nov. 9 will be one of many hundreds of weeks in the account's history.