Tuesday, May 19, 2009
401(k) Participatnts Stay Ahead By Rebalancing
Rebalancing your 401(k) portfolio is perhaps the easiest way to increase your investment returns, according to a new study by the Pension Resarch Council. While previous studies have shown that a consistent investment strategy outperforms most actively traded accounts, this study focuses on rebalancing. Over one million participants’ accounts were analyzed, and the results are clear.
According to the study, those who used only balanced or lifecycle funds outperformed on a risk adjusted basis.
The complete study can be found at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=942378#PaperDownload
Are your participants aware of this? Often times, there is an initial enrollment meeting, but that’s the end of it. A continuous communication program would give you an opportunity to add value and get the most out of your plan.
Sunday, May 17, 2009
“SINORAMA” and your 401(k)
I recently watched (part of) a baseball game in Toronto between the Yanks and Jays. Behind the batter was a sign which changes every inning or so, and for some reason the name caught my eye: “SINORAMA”. I was a little taken back as I tried to think of what sort of organization, place, or product it could be.
Turns out I wasn’t seeing the whole sign, which was for a casino…as in CASINORAMA.
So, what does this have to do with 401(k)‘s? It occurred to me that plan sponsors don’t always get the whole picture, either. I was reminded this week when I came across a Payroll Company 401(k) proposal with very low dollar cost. And no contract charge (it was a plan with less than $1mm). But somehow the 2.17% fund expenses were glossed over.
Plan sponsors at this level are often the owner/president/CFO and more and may not have the expertise to know what they are really getting. Any time there is a recession or worse, there is more opportunity for someone with a sales quota to say or do anything to get the business. If you can spend a few extra minutes and get the WHOLE story, you’ll get the true cost efficiency you’re looking for.
