Social Media & Marketing Director
High School Basketball Coach
University of Cincinnati Graduate
Center of Fiduciary Studies Graduate
Click the title to read an article by Dan Solin discussing the mismanagement of 401k assets by investment providers and plan sponsors. Many plan sponsors have no idea that they are personally liable for the investment decisions they make on behalf of their participants. It’s very easy: diversify globally, stay prudent and rebalance yet the lack of providers out there offering this type of vehicle makes it very hard to accomplish.
This graphic is very interesting and telling. Let’s put this in perspective. There are currently roughly 8,400 stocks in the US market. If you exclude the Top 10% of performers each year (840 stocks this year), your return suffers 3.4% annually.
What this means is that if you go back to 1926 and invest $10,000 in all US stocks and compound annually with no additional investment, you end up with $17.3 million. If you try to pick the best performing stocks (of which there is no data supporting anyone’s ability to do so) and you miss the Top 10% of performers each year, your $10,000 investment only grows to $1.2 million. You miss out on $16 million! If you miss the Top 25% of performers each year, your return drops to -1% per year. I don’t think the math is needed for that one. Stock picking is a risky proposition. I wouldn’t try it.
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