Participant Investing: Self-destructive?

"Emotional Rescue: Keep your own wits about you when investing": this is a very interesting article at National Review Online which discusses how "[w]hen it comes to money, our emotions often cause us to take stupid, self-destructive actions." Quote of…

Emotional Rescue: Keep your own wits about you when investing“: this is a very interesting article at National Review Online which discusses how “[w]hen it comes to money, our emotions often cause us to take stupid, self-destructive actions.” Quote of Note: “The mere chance of a loss is so frightening that many people prefer to make what they believe are riskless investments, rather than making investments which, over the years, have proven far more profitable with only slightly more risk. What does this mean in real life? For one thing, a lot of people in their thirties and forties direct part of their 401(k) retirement contributions to money-market funds, a foolish choice. Also, “through mid-2003,” says the Bernstein Journal article, “investors were still pouring more money into bond funds than stock funds, even though interest rates had fallen to less than nothing after inflation and taxes while the stock market was finally showing signs of life. . . “

Barrons’ Online via the Wall Street Journal Online (Subscription required) has this: “Retiring With Help: Pension investing should be simple.” The article points out how badly participants need help in investing their 401(k) accounts and notes that in May, “the House of Representatives passed a bill containing language to loosen .. . .restrictions on advice.” The article goes on to say that “the House has made this effort during past legislative sessions but the bills have fallen short of becoming law” and that “[s]ome lawmakers, especially in the Senate, are more concerned with preventing conflicts of interest on the parts of investment advisors than with getting advice to those who need it.” Quote of Note: “Recently, a young professional woman handed me a folder of disheveled 401(k) enrollment materials and asked me to translate them for her. If the instructions hadn’t read like a financial analysts’ exam, she might have discovered the life cycle account buried at the bottom of the form, which was all she really needed.”

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