Top Ten 401(k) mutual funds confirms my concerns

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A recent “Top 10 Funds in 401(k)s” article includes recent analysis of mutual fund company market share in U.S. company 401(k) retirement plans by Judy Diamond Associates.

There was no surprise on the dominance of the four largest company 401(k) retirement plan mutual fund providers. Vanguard, Fidelity, T. Rowe Price and American Funds have more than half of the assets of U.S. company 401(k) retirement plans.

What surprised me was that there are 28 target date mutual funds on the top 100 mutual fund list. Those mutual funds had 35% of all U.S. company 401(k) retirement plan assets at the end of 2014.

The link to the article, “Top 10 Funds in 401(k)’s” can be found here.

Far too many individual company 401(k) retirement plan participants have the majority of his or her company 401(k) retirement plan assets invested in a target date mutual funds.

Target date mutual funds are always the most expensive company 401(k) retirement plan mutual funds to own. Worse, I have never seen a target date mutual fund option to be ranked in the top hand full of default investment options. The investment performance is dismal for the majority of all target date mutual funds regardless of the name of the target date mutual fund company.

So, this analysis confirms my 17 years of experience providing investment advice to individual company 401(k) retirement plan participants. The majority of dollars invested in U.S. company 401(k) retirement plan accounts own the most expensive and worst-performing mutual funds available.

Ric Lager
Lager & Company, Inc.

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