Why Nobody Goes to CNN for Financial Information

August 4, 2008 by roland.

The following actually came from CNN:
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Part of the problem with 401(k)s, says Money’s Walter Updegrave in CNNMoney.com, is that 21 percent of Americans “turn to friends and relatives for advice” in picking their 401(k) allocations. There’s way too much at stake to have your “retirement prospects riding on odd Uncle Otto’s mutual fund picks.” You can hire a money manager to advise you, but the fees may make that unprofitable — unless your employer picks up part of the cost. But you can manage on your own, too, if you do “two key things: create a diversified blend of stock and bond funds and then rebalance annually.” You usually get free advice and other tools online. At the very least, try a target-date fund.
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Because CNN hasn’t bothered to hire a journalist in the past 20 years and run by MBAs, nobody pointed out the real problem with 401k plans. YOUR COMPANY CHOOSES THE VENDOR AND YOU ARE LEFT WITH ONLY A HANDFUL OF TRULY SH*TTY FUNDS TO CHOOSE FROM.

I remember listening to workers at the stock exchange I contracted at. Upper management had chosen “a big name fund company which advertises a lot” to be the retirement plan manager. At the time they had some of the highest performing mutual funds out there, and were making a lot of money for those with millions to invest. Only one catch. Of the funds available to retirement plans, there was only one which had made any money over the past 5 years and it had only made something like 5 or 7 percent. All of the others had lost money. You have to understand that this was during the up-swing of the DOT-BOMB bubble when even funds with bad managers were returning 30% or more.

The real problem with the 401k industry is that the mutual fund companies have been allowed to bleed it, and upper management hasn’t been sent to prison for their choices.

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