Mutual fund investors who choose no-load funds with low management fees no doubt think they are getting the best possible deal. But even investors in "low cost" funds get hit with hidden costs that amount to more than $10 billion annually.
It's time to shine some light on 401(k) plans. If we are going to rely on these plans for retirement security, then employers and workers need to understand the different investment alternatives and their investment performance and fees.
A 10 year record of stellar performance is not predictive of future performance. Instead, investors would be far better served limiting their portfolios to globally diversified, low-management fee index funds in an appropriate asset allocation.
Americans got ripped off during the financial crisis. Right? Nope! That began decades earlier when financial wizards invented a myth called the "efficient market hypothesis" based on Burton Malkiel's Random Walk.
The effect the European debt crisis will have is a matter of degrees and exposure. It's hard to discern how these unfortunate events will affect us and what actions we should take. In other words, what do we have control over and when are we just being reactive?
It is easy to forget that 401(k) plans have only been around for three decades. We have learned a lot in that period, and the jury is now in: The 401(k) experiment has failed. This system does a better job of enriching the financial sector than in providing retirement security to Americans.
Since 100 percent of its retirement funds beat their 5-year Lipper average, investors could believe that T. Rowe Price has consistently "beat the market". Is this accurate? Not if you understand how the use of benchmarks can be misleading.