Can You D.I.Y?
It’s fair to ask, can you do it cheaper yourself? Well, maybe – if you are incredibly disciplined, have access to sufficient asset classes and don’t lose your nerve. Every investment approach will have its ups and downs, but over-reacting to short-term underperformance can undermine your long-term results.
Research suggests that most of us will not be better off D.I.Y. The Employee Benefit Research Institute has found that do-it-yourselfers tend to take on more risk and do not rebalance their portfolios. Another report found that participants using professional management (including target date funds) have had higher returns across all age groups and market conditions.
So, Getting Back To Fees…
You should be aware of what fees you’re paying and why you are paying them. But don’t fall into the trap of assuming the lowest fee options are automatically the best. Your plan sponsor has a fiduciary responsibility to make choices in your best interests – choices based on realistic comparisons of fees and investment objectives. And it is the job of BlackRock and other providers to offer funds in a variety of share classes, investment styles and fee structures so that plan sponsors can make choices they believe are right for you.
Asset allocation models and diversification do not promise any level of performance or guarantee against loss of principal. Investment in the Funds is subject to the risks of the underlying funds.
Chip Castille, Managing Director, is head of BlackRock’s US & Canada Defined Contribution Group.