12.09.19
For Some 401(k) Holders, Picking Funds Is as Simple as ABC. Unfortunately.
by: Daisy Maxey
Research published in the Financial Review suggests that 401(k) plan participants are more likely to invest in mutual funds at or near the top of alphabetical listings. Investment choices on the websites that investors in defined contribution plans use are often organized by asset class, with the funds in each class then listed in alphabetical order. On average, each of the top four funds on such a list receives 10 percent more money than it would receive if money was allocated equally among the investment options, the researchers found. The findings suggest that ordering 401(k) investment options more strategically—for example, listed in ascending order by expense ratio or listed with low-volatility funds at the top—could improve investment outcomes for plan participants.
Read the full article on Wall Street Journal