The time has come-exchange traded funds (ETFs) have begun making inroads into 401K retirement plans. The growth potential for these funds has gone off the charts but skeptics don’t believe ETFs should be used in helping Americans plan for retirement. One of the largest obstacles of making ETFs available through 401K plans isn’t philosophical but technical. Most retirement plans don’t have the infrastructure to track records of more frequent trading, reports Michael Katz of TheStreet.com. Since ETFs can only be traded in whole shares, there is a huge complication for employers who contribute a fixed amount from each paycheck.
Another argument is the negative outflow of open-ended mutual funds if ETFs were to enter the same realm. The mutual fund industry has benefited from corporate America’s need to save for their own future. Although people are always searching for an alternative, adding ETFs into a 401K plan gives them too many choices, believes one insider.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.