For all the talk of risk in the academic world, it’s the real world that provides the best answer to what risk really is and how to avoid it. How do your thoughts on this compare with others?
Tag "behavioral economics"
This isn’t free money. It comes at a price. Many naïve folks might be salivating at the prospect of releasing these big bucks from the prison of their retirement plan… until they read the fine print.
A good fiduciary must keep a level head and know when emotions drive investors. After all, if they’re not careful, emotion will drive investors right off the cliff.
“Retirement savers must maintain long-term orientation regarding their assets. Supply and demand shock and generally easy to identify and often temporary in nature. These shocks often bring out the worst in decision making for investors. Astute investors will want to recognize this for what it’s worth: the opportunity to stand athwart the crowds in the market and purchase at cut-rate prices.”
If it is true the fear of loss motivates people more than the offer of a gain, then the traditional 401k company match framework is designed improperly. Currently, employees are promised a reward for contributing in their 401k plan. Think of this as the carrot urging people to save for their retirement. What if, instead of using a carrot, plan sponsors reframe the “match” in terms of a stick?
With a GOT-based strategy, expectations are predicated on needs, not the happenstance of the market. GOT-based portfolios may not have the record-breaking excitement of market indices, but it’s slow-and-steady-wins-the-race philosophy may lead to a more comfortable retirement.
“The want/should dichotomy addresses headed on the conflict between the instantaneous gratification derived from buying something today and the delayed gratification inherent in saving more for retirement.”
The Camel’s Nose. the Faustian Fiduciary Bargain, and an Ode to the Annuity.
RetirementCare coming soon? Fee Policy Statement coming soon? Behavioral smacks MPT.
FiduciaryNews.com Trending Topics for ERISA Plan Sponsors: Week Ending 4/8/16
Fiduciary 24/7; Hidden Fees; and the Bleeding Begins…