Thursday, June 15, 2006

Protect Investors From Themselves

Dalbar confirms that investors do more to harm their portfolios than the best investments could overcome. Investors loose over 3/4 of their potential gains primarily by attempting to avoid losses. The average equity investor earned 3.9% vs 11.9% annually for the S&P500 over the last 20 years according to Dalbar.

Plan fiduciaries have a legal obligation to act in the "best interests" of their participants. In the future, this might be construed as a responsibility to protect participants from themselves. Providing investment alternatives such as diversifed lifstyle funds, either risk or maturity based, could meet this standard.

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