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 4/10 Good --- feeds.portfolio.com http://feeds.portfolio.com/portfolio/dailybrief
| A smart take on the day's business headlines with insightful commentary and a sense of humor. ... |
Tuesday, May 13, 2008 --- 86 days ago http://www.portfolio.com/views/blogs/daily-brief/2008/05/13/the-great-retirement
| Too little spinach, too many of those crispy noodles and bacon bits.
Left to our own devices, most of us are bound to make bad choices, whether at the salad bar or with our retirement plans. So concludes a new report analyzing the investment choices of nearly 1 million 401(k) plan participants.
The godfathers of modern portfolio theory would roll over in their graves — if they weren't all still alive — to learn about the mistakes workers make in selecting from plan investments.
There's the one-over-n strategy, in which diversification is taken to its illogical extreme: equal proportions of every investment option in the plan. Or the barbell — half in the most aggressive holding, and half in the most conservative.
Thirty-eight percent of the plans studied showed very inappropriate levels of risk and inefficiency, according to a study by Financial Engines, a third-party adviser to retirement plans that was founded by one of those portfolio-theory godfathers, William Sharpe.
One-third of employees allocated too little of their salary to earn full employer matching contributions, and more than one-third of the plans allocated at least $1 in $5 to their own company's stock.
"Without help, advice, management, forecasting, expertise, I think it's a very, very hard task to expect someone to do on his or her own," said Sharpe, a Nobel laureate who pioneered the models for calculating risk-adjusted investment returns, a ... |
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