Last weekend, Warren Buffett’s Berkshire Hathaway 2016 annual letter to shareholders was published. I found a great summary of the investment advice part of the letter in this article on Business Insider.
I was struck by the direct language that Mr. Buffett used in his description of investment consultants. Most individual company 401(k) retirement plan participants don’t realize that investment consultants play a huge role in determining the default menu of their company 401(k) retirement plan mutual fund options.
Companies don’t pick the mutual funds to offer on their company 401(k) retirement plan menu. The larger the company, the more they rely on investment consultants.
Company 401(k) retirement plan menus don’t have enough index mutual fund options because investment consultants fill most of the default company 401(k) retirement plan menu options with more-expensive and worst-performing actively managed mutual funds.
Actively managed mutual funds make more annual revenues for both the investment consultants and the mutual fund companies.
As Mr. Buffett suggests, seek out the lower cost index mutual funds on your company 401(k) retirement plan menu. Even better, find out if you have the SDBA (self-directed brokerage account) option available in your company 401(k) retirement plan.
The self-directed brokerage account option allows you access even more lower-cost and better-performing mutual funds. You will no longer continue to suffer with high annual costs and low investment performance due to other people’s self-interest.
Profit from Mr. Buffett’s wisdom and experience. You now have a blueprint to lower your company 401(k) retirement plan account costs and improve your investment performance.
Ric Lager
Lager & Company, Inc.
