Sunday, February 15, 2009
401(k) Fund Performance - Don’t Make It Worse Than It Is
There may actually be a bright spot within the current economic climate. As companies struggle with the cost of their benefits packages, here is an easy way to provide increased benefits at little of no cost: review the investment lineup in your 401(k) Plan. Unless you have done this recently, a lot has changed over the years. We know of one popular fund which had a long and impressive track record, only to fall to the bottom quartile of it’s peers…and stay there.
And although performance is important, it’s important to know HOW that performance was achieved. Under pressure to perform, did the manager stray beyond their stated objectives? Or did they add a significant cash component to the portfolio until this all blows over? Those are two of the bad ideas we’ve seen, but not the only ones.
At the end of the day, plan participants (yourself included) will appreciate the fact that you’re being proactive and concerned about investment returns. The less money you lose in this market, the faster you can come back. Don’t forget, if you have a 50% loss, it takes a 100% gain just to get back where you were.