401k Investing for Newbies and Nerds
There are 90 million American workers who have collectively own $14 trillion in their 401k accounts. They face both challenges and opportunities. The largest opportunity is that their accounts are investment accounts, not savings accounts, and for the past three decades, many have grown their balances in the low double-digit range.
The main challenge 401k owners face is that there are required to make their investment decisions by choosing from a limited menu of mutual funds.
The 90 million 401k account owners can be divided into 3 categories. The first are those who could care less about their money and are willing to just take what they are given. The second group, NEWBIES, are inexperienced in the investment process, but are willing to become engaged in the management of their hard-earned dollars. The third group, NERDS, are those who have a modicum of investment expertise and are willing to devote the time and energy to expand their investments skills.
My mission is to motivate 401k participants to become engaged in their account and then train them how to optimize their results.
I have a 62-years of stock market experience. I have been a stockbroker, finance professor and individual investor. I have no investment products to sell. All I have to offer are the objective observations of one who has been there and done that.
401k Investing for Newbies and Nerds
Who Is Getting the Biggest Slice of the 401(k) Pie
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During a debate on the Federal budget, Herbert Humphry, the late, great Senator from Minnesota, said, “A billion here, a billion there, and pretty soon it starts to add up.” The same thing can be said for today's 401(k) program, except you need to change the B to a T.
According to the Bureau of Labor Statistics, there are 7,834 active 401(k) plans with 90 million participants. The value of their combined investments is in excess of $12 trillion. That's a number twice the size of the federal budget, and number that has the full attention of Wall Street’s bean counters.
What is unique about the 401K program is that it requires the individual investor to make their own investment decisions. But their choices are limited to a menu of mutual funds selected by a broker who is compensated by the funds they place in the menu. In this episode of my podcast, I will provide data on how the 401(k) pie is currently being distributed.