I looked over Vice President Joe Biden's initiative announced last Friday Feb. 26, 2010 to get 401(k) plans costs and management under control. It is the wrong approach. What does it take to get our representatives working for the people instead of working for the financial industry lobby?
For the 50 million mutual fund owners, the Vice President’s attempt to make sure the little guy is protected from over-charging self-enriching fund administrators and money managers, is far from the mark. The majority of Americans still believe that if you have a diversified portfolio of mutual funds they will go up in the long run at 8% a year. Truth is shocking. The long run can be longer than you imagine. 1905-1942 - about 0% return in a diversified portfolio. 37 years. 1965-1983 - about 0% return in a diversified portfolio. 18 years. 2000-2010 - about 0% return in a diversified portfolio with a long way to go to go up.
If the Vice President wants to make sure the little guy is protected from over-charging self-enriching fund administrators and money managers, a better approach is to require the 401(k) programs to include market index funds that have virtually no fees. But he doesn't do that. Instead he is going to further confuse the little guys with advice that is coming from an 'objective computer model certified to be unbiased by independent experts. These so-called "independent experts" are the same people who have been taking advantage of investors for years. It's like putting a fox in charge of the hen house. I will be shocked if these 'independent experts' are not bought and paid for by the financial services industry and fully on-board with broad market high fee funds that do nothing different than an index except charge a fee that could equate to about 20% of your potential return per year.
The government is accepting comments from the public until May 5. Contact your State Senator and voice your complaint to stop this attempt by big government to give more control to the people who have already messed it up.
Now go play,
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