#9
Medium Risk
Too Little Diversity Among Investment Options!
Diversification reduces risk from market volatility and protects retirement savings from catastrophic losses.
- Potential Consequences
- Fiduciary liability
- Participant losses
- ERISA violations
- Inadequate diversification
- Prevention Tips
- Offer broad range of investment categories
- Include domestic and international options
- Provide various risk levels and time horizons
- Regular investment menu reviews
- Educate participants on diversification benefits
Need Expert Guidance?
Don’t let this mistake jeopardize your plan. Get professional help from experienced fiduciary advisors.
Diversification has been and always will be the investor’s best friend. Far too many people choose one or two investments for their retirement account, and although this may appear to work in the short run, it almost never works in the long run.
Diversification reduces the risk that any one bad market outcome will have a life-changing effect on your retirement savings. Bankruptcy and cataclysmic market selloffs are always on the table. If you are old enough, then just remember WorldCom, Enron, Washington Mutual, National City Bank, Bear Stearns and Lehman Brothers.
It is your responsibility as the plan sponsor to make sure that your plan participants have a diversified selection of funds in which to place their retirement savings.
"The beauty of diversification is it's about as close as you can get to a free lunch in investing."
— Barry Ritholtz
