Your retirement plan should not be a vehicle to speculate. If your investment strategy does not include the expected return and expected volatility you are speculating. Professionally managed portfolios will help you reach your retirement goals.

These papers offer 401k plan sponsors and the ERISA fiduciarythese valuable tips:

1. Make the first and most emphasized data that of the entire portfolio, not its underlying components;
2. Use the performance measure with the lower absolute magnitude or at least be aware of its effect; and,
3. Take the time to choose your default or ‘easiest chosen’ plan with much care because many may use it and a considered decision update lowers the opportunity (and real) costs down the road.

As these academic research efforts tell us, 401k plan participants can avoid making the wrong allocation decisions when 401k plan sponsors and any other investment fiduciary provide information about investment options in the right context and with the right emphasis. Here we see another instance where regulators and astute researchers can collaborate to help the financial services industry best serve its customers. Unfortunately, regulatory and industry convention appears to have kept performance reporting from being modified by new insights from research and freely morphing to help employees make better investment decisions for their retirements

Research has proven that 401(k) plans utilizing professionally managed portfolios will out perform plans with individual fund selection. This is a way for plans to offer a pension fund like plan for their employees.

Please comment or call to discuss how this affects you and your organization.