Not many individual Minnesota company 401(k) retirement plan participants know the right answer to this question. I thought a blog post providing the correct answer would be worth your reading time.
The question is, “Is your company 401(k) retirement plan mutual fund keeping up with the overall stock market index?”
Academic studies on this topic published every year. The latest one that I read stated that around 24% of all managed mutual funds outperform their closest stock market index benchmark.
That means that you have a 76% chance of owning a bad mutual fund in your company 401(k) retirement plan account. Those odds are not stacked in your favor.
It is possible that you currently own one of the best mutual funds options available on your company 401(k) retirement plan menu. But it is not very likely.
If you don’t pay any attention to what mutual funds you own in your company 401(k) retirement plan account, your chances of getting the investment performance that you are paying for is not very good.
A mutual fund investors pays a mutual fund manager an annual fee. Most mutual fund managers do not add any improved investment performance. That means that company 401(k) retirement plan participants are not getting the extra investment performance that they are paying for.
Why take all the risk of being 100% invested in the stock market and not get the best investment returns possible?
There is one thing worse. That would be to pay a mutual fund manager to keep you 100% invested in the stock market at all times and not getting the best investment returns possible.
There is an alternative. Most Minnesota company 401(k) retirement plan menus that I have seen have more than one index mutual fund option.
Index mutual funds are lower cost, and generally provide the same investment returns as a major stock market index.
Ric Lager
Lager & Company, Inc.
