A recent study by implication supports the use of asset allocation and lifestyle funds as default funds which were those designated in the Department of Labor’s recent proposed regulation.
The study by Tekeshi Yamaguchi, Olivia S. Mitchell, Gary Mottola, and Stephen P. Utkus, "Winners and Losers: 401(k) Trading and Portfolio Performance" (October 2006) for the Pension Research Council found that::
… in aggregate, the risk-adjusted returns of traders are no different than those of nontraders. Yet certain types of trading such as periodic rebalancing are beneficial, while high-turnover trading is costly. Interestingly, those who hold only balanced or lifecycle funds, whom we call passive rebalancers, earn the highest risk-adjusted returns (emphasis supplied).
Hat tip to Barry Barnitz’ Financial page blog which links through to the entire article.
