How Your 401k Participants Can Use Active Management

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PSI Newsletter and Website Header 10.2.15

By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

A passive portfolio management approach is appropriate for many 401k plan participants. But indexing isn’t right for everyone. Many 401k plan investors are not satisfied with market average returns. Nor do they feel it makes sense to lock-in 100% of every market decline. Many 401k plan participants believe they can consistently outperform market averages by applying a little of the right knowledge. Think there is no point to active management? Consider the following to make active management work in your 401k plan account: [Read more…]

Blending Active And Passive Options In Your 401k Plan

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Many 401k plan participants are convinced that active management, where fund managers attempt to beat benchmark index returns, no longer works. They prefer to have low cost, passively managed or index options available in their 401k plans. Given the high degree of correlation between investments post-crash, being 100% invested in passive funds would probably have been a smart strategy.

Most experts believe it is not likely that markets will remain as highly correlated in the future. Recently the folks at BlackRock, the largest asset manager in the world, shared research that indicates that blending active and passive choices is probably best for most 401k plans.

When Selecting Active Funds, BlackRock Recommends

[Read more…]

As Correlations Diverge — Time To Reconsider Active Management

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

We all know how markets have traded most of the time since the 2008 crash. Risk-on, risk-off. One day everything is moving up in value, the next everything is falling. Correlations between all asset classes seemed to be 100%. Regardless of what you were invested in: stocks, bonds, commodities, international equities, etc. the correlations of movement in prices and values was high. Investors received little or no benefit from diversifying. Indexing outperformed active management most of the time.

Things are changing.

Recently correlations have begun to diverge. In other words, the markets are returning to what most would consider to be normal. In normal markets, actively managed investment options in many asset classes tend to outperform. As we move away from risk-on, risk-off roller coaster markets where correlations between all asset classes were nearly identical, 401k plan sponsors should keep the following in mind: [Read more…]

Should 401k Plans Only Offer Index Funds?

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

You may have heard that many experts believe 401k plan participants should be confined to investing in index fund only line-ups. They say that the additional cost that participants pay for actively managed mutual funds is not justified by better performance. A number of employer plan sponsors have agreed, concluding that offering an index fund only line-up is the way to go.  [Read more…]

Five Reasons To Use Active Management

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PSI Newsletter and Website Header 10.2.15By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Recently, a number of market observers have suggested banning mutual funds using active investment management from 401k plans as a way of increasing participant balances. Their logic is that mutual funds using active investment management don’t beat market averages or benchmarks often enough to justify their higher fees. Also, it is said that funds using active investment management tend to be recommended by advisors who profit from their sale and therefore aren’t objective.

In certain situations, all of these comments may be true. However, there are good reasons for investors to embrace active investment management including: [Read more…]