I read a great article on the real costs of 401(k) mutual funds. I completely agree with the analysis.
In financial industry jargon, an active manager is a mutual fund manager. Mutual funds make up the vast majority of company 401(k) retirement plan options. Charley Ellis says that “because a majority of active managers now underperform the market, their incremental fees are over 100% of the long-term incremental, risk-adjusted returns.”
Many of the individual company 401(k) retirement plan participants that I sit down with are shocked by the real costs of their mutual funds. The only good news is that an honest conversation about those costs never fails to grab their attention.
I believe that a full disclosure of the annual costs of company 401(k) retirement plan mutual funds is important for all individual company 401(k) retirement plan participants.
Once the costs are compared, the SDBA (self-directed brokerage option) available in more and more company 401(k) retirement plan menus becomes an attractive option.
Ric Lager
Lager & Company, Inc.
