“It had been a nice run of 20 years and it was easy to be an investor,” he says. For that reason, there were many older investors feel secure enough to have heavy allocations to equities and just 20% in bonds. “Had they been in bonds, they would not have taken as big a hit.”

Why ETFs Make More Sense

Robertson believes that ETFs generally are a better fit for 401(k) plans than mutual funds.

The mutual fund industry has an array of different share classes, expense ratios and what they cost relative to what people get in return. “If you think about long-term performance, I don’t understand why there aren’t more index-based approaches,” he says.

The numbers bear this out: ETFs have $788 billion, while mutual funds still dwarf that with $11 trillion. Though the industry is seeing outflows, ETFs have a long way to go before they have any hope of turning the tables.

Many people believe they’re going to beat the market, Robertson says, and there’s a growing segment of the market that gets that it’s not consistently possibly. The rest of the market is still going to high-cost actively managed mutual funds.

Your 401(k) Plan: Where Do You Start?

Though it would be nice if most investors sat down and looked at their 401(k) plans and came up with an asset allocation plan that was appropriate for their goals and their age, Robertson says this is just simply not the average participant.

“The average participant says: How much should I put in and, okay, now what do I do?”

Robertson says 10% is a good place to start, though some put in more, others put in less.

ShareBuilder 401(k) offers 16 funds to choose from, though they suggest looking at the model portfolios first, which range from very stable to very aggressive. Participants should choose the portfolio that looks most like where they are.

“We’re trying to make it difficult for participants to get off on the wrong foot,” Robertson says, since as registered investment advisors, they share the fiduciary responsibility by managing the investment lineup and the portfolio allocations so companies can limit their investment fiduciary risks. “If we think a fund doesn’t fit anymore, we’ll take it out.

Although ETFs in 401(k) plans might be relatively rare these days, there are several providers offering them. If you know of any others, please tell us in the comments:

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