Picking an index fund is easy, right? It’s generally considered to be a commodity, and so the one with the lowest cost is it.
Apparently, it’s not even close to easy for the subjects of a recent study conducted by professors at Yale. In the best case scenario, 80% of the subjects failed to pick the lowest cost index fund. The subjects of the study? Wharton MBA and Harvard College students.
If you are a proud parent of a son or daughter at Wharton or Harvard, don’t feel pessimistic about their ability to manage their future 401(k) and 403(b) accounts. Help is supposed to be on the way. The new "pension protection" bill that could pass as early as next week may include a provision that allows 401(k) plan service providers to provide investment advise to plan participants. Good deal or bad deal for plan participants? The devil, as they say, is in the details. Let’s wait and read the fine print.
For more about the Yale study, here is a link to The Capital Spectator’s post which describes the study in more detail and includes a click through to a copy of it.