401(k) Menu and Total Portfolio Management

Should-I-Max-Out-My-401kWeak cohesiveness throughout an Investor’s portfolio can disrupt effective diversification and cost structure. Employer retirement plans such as 401(k)s, 457s, and SIMPLE plans, are often managed or held by a custodian different than where a client invests their Individual Retirement Accounts (IRAs) and other personal dollars. It is important that this piece of the puzzle does not become a loose end but rather intertwines and works together with other dollars inside a portfolio. However, the limited investment options in these retirement plans can cause challenges to optimizing total portfolio management.

From my experience analyzing and researching investment choices with respect to 401(k)s, as an example, many plans have scarce available options on their “menu”. These limitations can put optimizing total portfolio management in a choke hold relative to underlying cost and asset allocation structures. Investors need to be aware that position expense ratios, or fund costs, can have a major impact on hindering portfolio performance. Narrow investment menu choices can often leave investors little wiggle room to minimize the portfolio cost structure. Broad asset allocation diversification can also be hampered, leaving 401(k) investors with much to be desired from holding diversification due to limited funds available.

Although limited 401(k) fund options can cause a drag on total portfolio optimization at times, investors should have a thorough understanding of underlying cost structure and asset allocation unique to their portfolio. Take notice of opportunities to improve the structure, cost and diversification of your portfolio. As always, think long-term and stay balanced with respect to your overall investment objectives.



Published: April 17, 2015

Kyle B. Reynolds, Securities Trader / Research Analyst

Direct Phone: 812-602-6303

Email: kbreynolds@paynewealthpartners.com 

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The information in this material is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements. The information does not attempt to examine all the facts and circumstances that may be relevant to an individual’s financial needs. Payne Wealth Partners, Inc. is not soliciting any action based on these statements.

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