Diversify Your 401K with ETFs
As exchange-traded funds become increasingly popular with investors (ETF assets increased from $65.6 billion in 2000 to $422.6 billion in 2006), many retirement investment firms are pushing to increase ETF investment in the arena of 401(k) plans, where mutual funds have long been king.
Many of the benefits of ETFs -- intraday trading, transparency, and tax efficiency -- are better suited to nonretirement accounts, Roth IRAs, and Roth 401(k)s than to traditional tax-deferred 401(k)s. However, asset management companies such as XTF are increasingly introducing ETF-based mutual fund portfolios, which will help plan managers meet their fiduciary responsibility of ensuring diversity in investment options -- removing a significant obstacle to wider adoption of the funds.
As ETFs become a more viable and accessible option for retirement investing, it doesn't necessarily mean it's the right option. The market, it's a-changing -- and employees need to be educate themselves to maximize their contributions.