Meet Kevin, our director of marketing. In the evenings he’s a private portfolio manager. And here’s James, our shop foreman. He’s also a private portfolio manager in his spare time.
When you think about it, you could be saying the same thing about your employees if you have a self-directed 401(k) plan as your company’s retirement plan. Why? Because each plan participant, regardless of their knowledge of markets or their investment experience, is required to manage the investments in what is likely to be the most important resource for the last 25 to 30 years of their life. Their investment performance will determine their quality of life during retirement.
But your plan offers a wide range of professionally managed mutual funds, right? You’ve only selected those funds with a solid performance record for the last 3, 5, or 10 years. If there is one thing you know for certain about your company’s 401(K) plan it is that your employees can allocate their retirement savings in funds directed by some of the best money managers in the world.
That’s true in theory, but investment returns only count in practice. Consider the following: