But the reason for both is that these solutions have proven to be extraordinarily popular investment choices for participant-directed retirement plans.
This week, I asked readers if their retirement plan offered some kind of asset allocation solution – how that was working out – and if they had invested all/any of their retirement savings there?
The vast majority of this week’s respondents (nearly 89% ) had some kind of asset allocation solution on their menu – in fact, nearly one-in-five said they offered more than one type. Roughly one-in-ten said they didn’t offer the option, while roughly 2% said “not yet.”
Have YOU Invested There?
Having said that – less than half ( 48.5% ) of this week’s respondents had invested their balances there. While 17% had put 100% in those options, nearly a quarter ( 24.2% ) intriguingly said that they had put money there – but less than 100% of their retirement plan balance.
Now, I know what some of you are thinking – but there were reasons proffered for that distinction; “Other than Company Stock match, 100% invested in a Target Fund,” noted one, while another said, “All my “new money” goes into a target date fund, but haven’t moved existing balances” (several noted that situation, by the way).
One reader explained his decision by noting, “I guess I have a gambler’s heart, or maybe I am just greedy.”
As "bonus" questions, I asked about asset allocation performance and fees. On the former, a strong plurality, 39%, said their plan's asset allocation solution was performing "as expected", while nearly a quarter ( 23.7% ) said "good." One-in-ten went so far as to say "great!." Just 4% said "not so good" or indicated that they were looking to make a change, while 8.2% said "who knows?" (by the way - not necessarily a bad thing. As one reader noted, "I can't say how it has been performing as compared to other funds and indexes but that is why I have my money there." ).
About one-in-eight chose "other", mostly either because the choice wasn't available, because the choice hadn't been in place long enough to provide a good sense, or as one reader noted, "Depends on who you are talking to - the guys who manage the funds say its "great". Those of us who can read a prospectus have our doubts.....".
There was a positive reaction on fees as well - just over a third said they were satisfied with the fees paid relative to value received (one reader noted, "The expense ratio of my asset allocation fund is 19 BP. Other than index funds, I can't find investments with that low of an expense. In addition, it means I don't have to worry about diversification, rebalancing, etc... I love the hands off feel of the fund." Another noted, "..it's hard to be dissatisfied with the fees of our target funds when the expense ratios are 19 to 21 basis points and lower than any of our individual fund offerings. Makes you wonder if this is really all the cost, but then the feds are wondering that alsoâ€¦" , while nearly a quarter said they were very satisfied with that combination. A nearly identical 23.3% said they were "more or less" satisfied with the fee/value proposition, though 6% said "no" (the rest were "not applicable" situations). In fact, one reader noted, "Fees are why I don't invest in the funds."
Still, this week's Editor's Choice goes to the reader who noted, " These are our proprietary funds. I know the guys who manage them. I'd rather keep my money in a shoe box under my bed than give it to them."
Thanks to everyone who responded to our survey!
|But my IRAs are 100% invested in a Fidelity 2040 target-date fund.|
|I did, but have since transferred them out.|
|I guess I have a gambler's heart, or maybe I am just greedy.|
|I took advantage of the free 3 month trial and the advice was to continue with my current asset allocation. Decided it wasn't worth thousands in fees each year for the advice.|
|Instead of target funds, I've chosen to take advantage of the free advice service in my plan that auto rebalances my assets 2x's a year.|
|Other than Company Stock match, 100% invested in a Target Fund|
|Nor do I plan to. I believe these types of "solutions" are good mainly for the company offering the product. Some investors benefit because without this type of simplified offering, they would do nothing. But most investors are better served building & maintaining their own asset allocations. I know, that takes work, but it's their money & their retirement they're supposedly planning for. Investors should be actively engaged in the process, otherwise they get what's handed to them.|
|Future contributions are invested there 100% but previous balance has not been moved.|
|No asset allocation funds are available in our own plan since our firm's president does not feel target funds or any type of indexed funds are appropriate for financial professionals who can do their own asset allocations.|
|These are our proprietary funds. I know the guys who manage them. I'd rather keep my money in a shoe box under my bed than give it to them.|
|I'm not much of a "go along for the ride" kind of person, be it managed accounts or asset allocation funds. I definitely need to be in the driver's seat, whether I actually practice ongoing asset allocation and rebalancing or not!|
|. . . . and there are people who wonder what happened. I don't think I've received a statement, I don't know what I'm invested in, so I hope that it is trus that to get a fund and then hang on will net me some worth in the long run. . . .|
|I used the asset allocation fund to put my money in when I first started here. I left it there until I was able to investigate the other funds available.|
|I'm not savvy enough to move my money around - that's why I plunk it all in a date targeted fund and let them do the balancing. I'm still not certain if that's the best I can do with my 401k money.|
|Currently my participants are very aggressivly invested in equities. As a whole about 2/3 are doing better than their age appropriate target date fund. However, I do strongly agree with John Bogle's chapter in his book "Common Sense on Mutual Funds" titled "Regression to the Mean." Sooner or later our participants performance will match the market. Go Idex!|
|The expense ratio of my asset allocation fund is 19 BP. Other than index funds, I can't find investments with that low of an expense. In addition, it means I don't have to worry about diverisification, rebalancing, etc... I love the hands off feel of the fund.|
|The fees associated with these funds are the highest of any options offered, and savvy participants are avoiding them in favor of a diversified portfolio.|
|Provide information about actively managed Taget funds vs passive/indexed Target funds.|
|Fees are why I don't invest in the funds.|
|I don't invest in these funds because I look at my 401k as part of my entire portfolio of assets, and prefer to use it to manually achieve asset allocation. I worry that too many conclusions are drawn from raw 401k data. I can't be the only person with other assets, and the fact I own bonds in my 401k does not mean I am risk averse--quite the contrary, I have a high proportion of assets in stocks.|
|Related to fees...it's hard to be dissatisfied with the fees of our target funds when the expense ratios are 19 to 21 basis points and lower than any of our individual fund offerings. Makes you wonder if this is really all the cost, but then the feds are wondering that also.|