Daisy Maxey
speaker
120 appearances
2 recordings
1 series
first heard Oct 2017
last heard Dec 2019
Daisy Maxey’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · Picking 401(k) Funds Can Be as Easy as ABC, and That's Bad · 11 Dec 2019
podcast
These researchers looked at data
from nearly 6,000, well, nearly 7,000 defined contribution plans, regulatory data filings they had made in 2007.
And they looked at plan sponsors of all types, plan sponsors of all sizes, and found that 401k plan participants are more likely to invest in funds that show up at or near the top of alphabetical listings.
Well, it's interesting.
The average plan had about 10 equity funds, and the researchers looked mostly at equity funds.
And they found that by moving a fund from the bottom of a plan menu to the top, it increased the percentage of plan assets to the average fund to 11.68% from 9.9%.
And as the typical plan had about $32.5 million in assets,
The effect would be about $578,500 more going into a fund if it was moved to the top from the bottom.
They were looking at funds that were listed differently.
ordinarily funds are listed in classes.
The 401k investment options are listed in broad classes, such as equity funds, money market funds, bond funds.
And then in each of those categories, they're listed alphabetically.
But that's just the way they're listed.
There's nothing magical about the alphabetical part of it.
They could be listed by
Expense ratio.
And people would still choose the ones that are near the top.
What's really happening is that when choosing between multiple alternatives with different attributes, individuals typically stop searching after they find the first option they deem acceptable.
even if going on, could find a better result.
They just stop when they find an acceptable option.
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