Wall Street for Dummies
Eighty million American workers actively participate in their companies 401(k) plan. Collectively, they have $12 trillion dollars invested in these plans. Regulations require them to make their own investment decisions by selecting from a list of mutual funds prepared by an investment professional who is compensated by the mutual funds they choose to include on the list. Last year, American workers paid $275 billion dollars in fees to have Wall Street manage their mutual funds. Over the course of the next decade is figure will exceed $3 trillion dollars.
There are those 401(k) participants who choose funds with minimal fees and superior performance. Others choose funds with high fees and subpar performance. The mission of Wall Street for Dummies is to educate 401(k) plan participants on the impact of fees on mutual funds’ performance and provide them with commentary on how to use the cost efficient and best performing funds.
I have a 62-year relationship with the stock market. I have been a stockbroker, finance professor and individual investor. For the past ten years I have devoted my professional efforts as a free-lance stock market pundit. I have no investment products to sell. All I to offer are the objective observations of one who has been there and done that.
Wall Street for Dummies
Season 1 Episode 21 Trump's 401(k) Executive Order. Is the Juice Worth the Squezz
There are 90 million American workers with company sponsored 401(k)plans. These 7,143 plans have a cumulative value of $14 trillion. This figure is twice the amount of the federal budget and 25% of the total value of the US stock market.
Plan participants are required to choose their investments from a list of mutual funds prepared by a financial professional who is compensated by the funds they recommended. In 2015, the US Supreme Court mandated that employers must provide reasonably priced mutual funds or be fined to make up the difference.
But with the stoke of a pen, President Trump has turned the 401(k) world on its head. On August 1, he signed an executive order directing the Department of Labor to open up 401(k) plan dollars to previously unavailable alternative investment vehicles such as private equity, real estate, and crypto currency.
The exact implement date and details of the investment products are yet to be determined. But we do know that the Wall Street marketing departments have been burning the midnight oil to prepare investment vehicles based on concepts yet to be tested and proven.
In this episode, I will share my thoughts on how Wall Street might package these alternative assets into a product for use in 401(k)s. I will also share my thoughts on how they might perform and how to evaluate their performance vs those funds currently available in 401(k) accounts.