While I entirely agree with you that lack of proper risk management is the underlying reason for such heavy losses to 401(k) plans, the fact remains that most Americans will continue to invest much of their retirement savings in the market because of the historic returns that the market has provided. A responsible Advisor should make participants aware of risks and help in mitigating them, but to not invest at all in the market due to recent fluctions in value is myopic. While the transparency that ETFs offer as compared to mutual funds does help is making better informed choices, perhaps the most powerful argument in favor of using ETFs in 401(k)s is the cost savings that ETFs offer over mutual funds. The seemingly minimal savings of a few basis points that ETFs-capable platforms like that of RPG Consultants offer can compound over a career of savings into large sums. The bottom line is that participants will always gain when cutting the costs of their investments. As Tom mentions, the majority of mutual funds fail to beat their benchmarks over five year spans, so why pay more for a service that has a proven track record of failure?

Thank you for your comment and for sharing your opinion.

ETFs will be a better option for 401(k)s because they're easier to understand, cheaper and more transparent than mutual funds, which only have to disclose their holdings once a quarter. The heavy losses seen in portfolios are evidence of cracks in the “buy-and-hold” philosophy, so 401(k)s have to change on several levels, not just what's in them.

The other issue is the performance of mutual funds – most of them have underperformed their benchmarks, and the average person choosing their 401(k) makeup probably doesn't know this, and he or she probably also doesn't take the time to research the funds. Many of these funds contained as 401(k) options have been deemed by experts as “average.”

If investors were given the option to simply buy the market (and cheaply), instead of trying to guess which funds will beat the market, they're going to be much better served in the long run.

Thank you for your comment and for sharing your opinion.

ETFs will be a better option for 401(k)s because they're easier to understand, cheaper and more transparent than mutual funds, which only have to disclose their holdings once a quarter. The heavy losses seen in portfolios are evidence of cracks in the “buy-and-hold” philosophy, so 401(k)s have to change on several levels, not just what's in them.

The other issue is the performance of mutual funds – most of them have underperformed their benchmarks, and the average person choosing their 401(k) makeup probably doesn't know this, and he or she probably also doesn't take the time to research the funds. Many of these funds contained as 401(k) options have been deemed by experts as “average.”

If investors were given the option to simply buy the market (and cheaply), instead of trying to guess which funds will beat the market, they're going to be much better served in the long run.