Report reveals long odds against your 401(k) mutual funds

Truly one of my favorite web sites to keep my clients informed is Business Insider.

Each day this site is filled with aggregated business news from all over the world. There is no question that the content on this web site makes me a more informed investment advisor to my individual company 401(k) retirement plan participant advice clients.

On April 16th, the web site published an article that referenced the most recent S&P Dow Jones Indices SPIVA report card. Here is the SPIVA Statistics & Reports.

The highlight of my client communication on this article was the following quote from the SPIVA report card.

“During the five-year period ending Dec. 31, 2016, 88.3% of large-cap managers, 89.95% of mid-cap managers, and 96.57% of small-cap managers underperformed their respective benchmarks.”

The lagging investment performance was even worse over the last 15 years. Here is another quote from the article.

“Over the 15-year period ending Dec. 2016, 92.15% of large-cap, 95.4% of mid-cap, and 93.21% of small-cap managers trailed their respective benchmarks.”

These two sets of investment performance statistics clearly state the investment management challenge to individual company 401(k) retirement plan participants. How on earth are inexperienced and time-starved individual investors supposed to pick the best default company 401(k) retirement plan menu mutual funds to own?

The odds at your local casino are better than picking successful long-term mutual fund investments on your company 401(k) retirement plan menu.

Individual company 401(k) retirement plan participants should not try to pick their own mutual funds. There is technology and third-party fiduciary investment advice that can help improve long-term company 401(k) mutual fund investment management decisions.

Your current company 401(k) retirement plan mutual funds have done well the last several years primarily due to an overall stock market advance. The combined individual contributions and company-matching contributions over that same period makes for nice looking quarterly statements.

This study paints a much different investment performance picture. You most likely don’t own the best company 401(k) retirement plan mutual funds available to you. And that fact has cost you tens of thousands of dollars over the last few years.

Ric Lager
Lager & Company, Inc.

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