“I own several 401(k) mutual funds, so I should be diversified.”
It is a reasonable thought.
But individual 401(k) investors are surprised to learn.
They end up with less diversification than they think.
It’s not how many mutual funds you own in your 401(k).
It’s the stocks those mutual funds own.
Understand the difference between diversification by name.
And stock and stock market sector exposure.
A 401(k) mutual fund selection mistake.
Can lead to a stock market risk management mistake.
Owning more mutual funds in your 401(k).
Is not the same as owning different stocks in those mutual funds.
Look beyond the mutual fund name.
Drill down to the top stock holdings in those mutual funds.
Not: “How many 401(k) mutual funds do I own?”
But: “What stocks am I depending on to make these funds work?”
There is huge individual stock overlap in all 401(k) mutual funds.
Different mutual fund names and descriptions.
The same overweighting in the same individual stocks.
With the stock markets near all-time highs.
Know the individual stock bets.
Your 401(k) mutual funds are making now.
Want a surprise with your lack of 401(k) diversification?
Let’s connect and I can share your mutual fund details.
P.S. More 401(k) mutual funds does not create better diversification.
