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Part of the problem is that most 401Ks have a very limited set of investment options. You get a short menu of choices arbitrated by a clueless HR person at you

by ff317 5y ago

Part of the problem is that most 401Ks have a very limited set of investment options. You get a short menu of choices arbitrated by a clueless HR person at your company and the self-interested financial company that manages the 401K plan: a bunch of standard mutual funds and index funds, some are semi-targeted (e.g. large-cap vs small-cap, whole-market, foreign-vs-domestic, target-date, tech?). If you're lucky, there might be a couple of different bond funds, and maybe a money market option to park cash temporarily. There's not often the flexibility of a regular investment fund (e.g. an etrade account) to go after other specific options or individual stocks and bonds, or especially any kinds of commodities, futures, options, etc. I get the rationale: it's set up that way so that it's a "safer" investing option, because they're afraid people will make bad choices and lose their 401K balances. But the flipside is you don't get much flexibility in making the wisest or most self-interested investment decisions. The 401K -managing firms love it though, as they get to sell a bunch of funds that are often in-house and have fees, and the real free-market-trading investors like it because the 401Ks put a bunch of very predictably-timed money into predictably-common choices, and they can rely on this to gain a little advantage/arbitrage.

quacked 5y ago
Related: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/ That site gets tossed around like candy and I don't think every graph they throw up is perfectly explainable by their central point, but what the invention of the 401(k) and IRA, both of which were released to the public only after the gold standard had finally been abandoned, really did was to allow wealth managers to pump completely unimaginable quantities of money into abstractions of value that are not actually related with physical wealth that materializes for Americans in the form of skills, a strong manufacturing industry, and robust supply chains. Michael Burry (Big Short guy) notes that the amount of money stored in indexes and funds tracking the S&P 500 are many orders of magnitude larger than the money that actually moves around between the shares of the S&P 500 companies themselves.
anamax 5y ago
> Part of the problem is that most 401Ks have a very limited set of investment options. Once you're retired, you can roll your 401K into a self-directed IRA which you can invest with not many restrictions. For example, you can put all your money into hospital stocks.

by ff317 5y ago

quacked 5y ago

Related: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/ That site gets tossed around like candy and I don't think every graph they throw up is perfectly explainable by their central point, but what the invention of the 401(k) and IRA, both of which were released to the public only after the gold standard had finally been abandoned, really did was to allow wealth managers to pump completely unimaginable quantities of money into abstractions of value that are not actually related with physical wealth that materializes for Americans in the form of skills, a strong manufacturing industry, and robust supply chains. Michael Burry (Big Short guy) notes that the amount of money stored in indexes and funds tracking the S&P 500 are many orders of magnitude larger than the money that actually moves around between the shares of the S&P 500 companies themselves.

anamax 5y ago

> Part of the problem is that most 401Ks have a very limited set of investment options. Once you're retired, you can roll your 401K into a self-directed IRA which you can invest with not many restrictions. For example, you can put all your money into hospital stocks.