It’s hard to pick 401(k) mutual funds too

books and pages

There was a great article in the Wall Street Journal yesterday about the dramatic changes in how large institutions are managing their money. The link to the article is listed below:

The Dying Business of Picking Stocks

This article reminded me of how difficult it is for individual company 401(k) retirement plan participants to pick the right mutual funds on their default company retirement plan menu.

The largest and smartest institutional investors in the world have given up on their abilities to pick the right stocks to own. How on earth can individual company 401(k) retirement plan participants hope to choose the best mutual fund options on their own?

The article also cites the example of a large law firm 401(k) menu in Austin, TX. The members of the firm’s retirement plan executive committee made the move from managed mutual funds to index mutual funds out of frustration.

Index mutual funds offer better investment performance is some cases and their annual costs save individual firm 401(k) retirement plan participants thousands of dollars in fees.

Most company 401(k) retirement plan menus have a limited selection of index mutual funds. But the majority of company retirement plan menus don’t have enough index mutual funds options.

Now is a great time to ask for a complete analysis of your default company 401(k) retirement plan menu options. Compare the most recent investment performance of each mutual fund. And completely understand how expensive each mutual is to own on an annual basis.

The investment management technology available today allows independent third-party investment advisors to provide this analysis to individual company 401(k) retirement plan participants.

These investment advisors work on behalf of the individual company 401(k) retirement plan participant, and not in the best interests of the company 401(k) retirement plan sponsor or company 401(k) retirement plan provider mutual fund company.

Ric Lager
Lager & Company, Inc.

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