No Nothing

Over the weekend a friend sent me his 401(k) options to review. I wouldn’t wish this lineup on my worst enemy.

All of the choices come from one fund family. There are no index funds. The target-date funds are 79 basis points.The only thing that is listed is a one or two-sentence description, accompanied by 1, 3, and 5 year performance numbers. There are no fees, no benchmark comparisons, no portfolio composition breakdown, no nothing.

If you’re just a regular person opening this up, the only thing you have to go by are the descriptions, which read like something you’d see in a wine magazine. Below are a few of them, with my commentary and fees in parentheses.

“Seeks to provide income and an opportunity for growth of principal consistent with sound common stock investing.” This sounds delicious, I’ll take 10%. (1.46%)

“Designed to help investors pursue long-term goals by investing in funds with exposure to companies located around the world.”  Sounds boring, pass. (1.54%)

“Seeks to help investors pursue longer term goals through exposure to a diverse mix of stocks of companies with strong growth potential.” This totally sounds like me, 15%. (1.49%)

“Takes a flexible approach to seeking growth opportunities, seeking out classic growth stocks, cyclical stocks and turnaround situations.” I don’t know what this means. 5%. (1.42%)

“Seeks to take advantage of changing global trade patterns by investing in multinational companies based in the United States and overseas that have strong growth prospects.” Strong growth prospects is my middle name. 10% (1.55%)

“The fund of funds seeks to help investors build assets over time through exposure to a wide variety of stock investments as well as income from dividend-paying companies and fixed income securities.” A fund OF funds? Yes please. 10%. (1.43%)

“The fund seeks long-term growth while providing income, offering investors an opportunity to participate in dynamic markets all over the world.” I can’t define dynamic, but I can use it in a sentence. 5%.  (1.54%)

“Contrarian and eclectic, seeks undervalued, overlooked and/or out-of-favor stocks. Emphasizes capital appreciation over yield.” Literally no idea what this means. 25%. (1.4%)

“With exposure to a diverse mix of stocks from dividend-paying companies and fixed-income securities, this fund of funds seeks to provide income and long-term growth potential.” Sounds like something my grandfather would invest in. Pass. (1.39%)

“Flexibility is the keyword for this fund, which seeks above-average current income and growth of capital through a wide mix of stocks and bonds.” I do like flexibility. 2%. (1.4%)

“With a diversified portfolio of quality stocks and bonds, this fund seeks three goals: capital conservation, current income and long-term growth of capital and income.” Three goals is better than two. 6%. (1.36%)

“Offers exposure to a mix of global stocks and bonds that can temper the impact of volatility on an overall portfolio to help an investor pursue future needs and goals.” Oh I like this. 12%. (1.48%)

The two below are bond funds. No. Just no.

“As part of a diversified investment strategy, this fund of funds seeks to provide investors a source of current income.” (1.4%)

Our most diversified bond fund invests in nearly every sector of the bond market, with a focus on securities rated A or above.” (1.36%)

This is as bad a plan as I’ve seen. There are no redeeming qualities here. The investment options aren’t good, and the descriptions are hilariously banal. Things like this are one of the reasons why financial professionals might not have the best reputation. But for those of us trying to do the right thing, the fact that plans like this still exist should give you all the motivation you need to keep trucking.

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