Blankets For The Indians & 401k's For The Retail Investor
Blankets For The Indians & 401k's For The Retail Investors.
Both are silent killers.
These days, the white man is paying for his sins.
Casino on every corner.
But we've been wondering when is the 401k/mutual fund industry going to pay for their sins.
When is the average retail investor going to get his/her payback for the failed experiment called:
401k.
Let's face it. The average retail investor has paid the average 401k plan 1.5 or 2% for the last 5, 10, 15, and in some cases 20 years for the luxury of earning 0% (basically nothing).
Sure, there are a few funds with 5 starts that, "Outperformed".
Go Morningstar!
But how can performance this bad get paid so well for so long?
Sadly, the fees really aren't the real problem.
The real problem is how 401k's are designed.
There is no exit strategy.
None.
You will never hear your 401k vendor say: Get out.
Even worse, the mutual funds that sit inside of your 401k are all based on some type of MVO (Mean Variance Optimization) algorithm. Everything is based on the Bell Curve.
Consequently, all 401k's are based on, "Average Design, for Average Acting Markets".
The problem is that markets aren't average anymore.
The combination of Wall Street's high frequency algorithmic trading super computers and extreme leverage techniques have made 4, 5 and 6 standard deviation movements the norm.
And if not the actual norm, these movements are starting to show up more frequently than ever before.
Average markets do not cause financial ruin. It is the statistically improbable event that causes financial ruin. Yes, eventually markets do revert back to the mean. However, it is the freakish event that kills 401k investors.
These MVO algorithms (and the people who pay homage to them) treat these freakish events as if they were financial fairies.
When you need these models to protect you the most, they fail.
When markets heat up and get crazy, everything correlates to 1. Everything moves in the same direction simultaneously.
The God's of the 401k universe will sheepishly acknowledge this, but then do nothing about it. They point out that their strategy works most of the time. And to be fair, this is a true statement.
So let's be honest:
401k's are expensive, have no exit strategy and are poorly designed.
401k investors have been given financial blankets dipped in financial MVO bell curve disease.
As always, we remain optimistically paranoid, with a twist of, "Really pissed off".
In conclusion, we see it like this: If the auto industry can survive from the Pinto, Gremlin and Pacer debacle, then surely our government and our beloved financial services industry can come up with a better way to save for retirement.
Both are silent killers.
These days, the white man is paying for his sins.
Casino on every corner.
But we've been wondering when is the 401k/mutual fund industry going to pay for their sins.
When is the average retail investor going to get his/her payback for the failed experiment called:
401k.
Let's face it. The average retail investor has paid the average 401k plan 1.5 or 2% for the last 5, 10, 15, and in some cases 20 years for the luxury of earning 0% (basically nothing).
Sure, there are a few funds with 5 starts that, "Outperformed".
Go Morningstar!
But how can performance this bad get paid so well for so long?
Sadly, the fees really aren't the real problem.
The real problem is how 401k's are designed.
There is no exit strategy.
None.
You will never hear your 401k vendor say: Get out.
Even worse, the mutual funds that sit inside of your 401k are all based on some type of MVO (Mean Variance Optimization) algorithm. Everything is based on the Bell Curve.
Consequently, all 401k's are based on, "Average Design, for Average Acting Markets".
The problem is that markets aren't average anymore.
The combination of Wall Street's high frequency algorithmic trading super computers and extreme leverage techniques have made 4, 5 and 6 standard deviation movements the norm.
And if not the actual norm, these movements are starting to show up more frequently than ever before.
Average markets do not cause financial ruin. It is the statistically improbable event that causes financial ruin. Yes, eventually markets do revert back to the mean. However, it is the freakish event that kills 401k investors.
These MVO algorithms (and the people who pay homage to them) treat these freakish events as if they were financial fairies.
When you need these models to protect you the most, they fail.
When markets heat up and get crazy, everything correlates to 1. Everything moves in the same direction simultaneously.
The God's of the 401k universe will sheepishly acknowledge this, but then do nothing about it. They point out that their strategy works most of the time. And to be fair, this is a true statement.
So let's be honest:
401k's are expensive, have no exit strategy and are poorly designed.
401k investors have been given financial blankets dipped in financial MVO bell curve disease.
As always, we remain optimistically paranoid, with a twist of, "Really pissed off".
In conclusion, we see it like this: If the auto industry can survive from the Pinto, Gremlin and Pacer debacle, then surely our government and our beloved financial services industry can come up with a better way to save for retirement.
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