Have you ever wondered what an independent investment professional would think about your current company 401(k) retirement plan mutual fund choices?
I found this April article on Bloomberg.com that might help.
As a quick reminder, actively managed mutual funds are what you most likely own in your company 401(k) retirement plan account now. You currently pay annual investment advisory fees to these mutual fund managers to manage your company 401(k) monies.
Here’s the problem. The majority of active mutual fund managers have underperformed benchmarks for the last serval years. The best mutual funds to have been invested in your company 401(k) retirement plan over the last few years have been low-cost, passive, or index mutual funds.
Don’t know the basic difference between an actively managed mutual fund and an index mutual fund? I would guess that 99% of the people you work with you participate in your company 401(k) don’t know either.
Think of it this way. You are most likely still using a basic cell phone (actively managed mutual funds) and the whole world is using a smart phone (index mutual funds).
Your current company 401(k) retirement plan investment management strategy needs to be “disrupted.” Wow, I just wrote that like I work at a big company!
The investment performance gap between active mutual funds and index mutual funds in not going away any time soon. The high annual costs and lack of investment performance have doomed active mutual funds for the foreseeable future.
All the active mutual funds managers in your company 401(k) care about is gathering as many assets as they can each year. That is how they get paid. Lowering your annual costs and providing great investment performance are not important to them.
Active mutual fund managers follow the company line with mutual fund portfolios that in most cases don’t outperform the stock market index they are supposed to beat. Why continue to pay high annual cost for underperformance and no stock market risk management?
Index mutual funds are the place to be invested in your company 401(k) retirement plan account now. If you really want to lower your annual costs and improve your investment performance, find the index mutual fund options available to you now on your company 401(k) retirement plan menu.
Your only other alternative is to find out if you have a SDBA (self-directed brokerage account) option in your company 401(k). You can own all the low-cost and better-performing index mutual funds you want in that account.
Ric Lager
Lager & Company, Inc.
