A new story from Financial Engines Investing Sense


The funds at the top of the list at the start of the alphabet get ten percent more money from employees then the funds bottom of the list the funds in the fifth to tenth place get five percent less money than the funds at the top the study was done by professors at Seton Hall University Saint Louis University Kansas State University in addition to the abscess behavioral science center and they discovered that when they gave employees education and they said this list is randomly sorted of choice at the top of the list is not meant to suggest it's the best choice even when employees were given financial education to warn them that the list is randomly sorted it didn't matter people continued to put more money in the top funds in the last then in the rest of the last so here's what you need to do resort the last manually use word cut and paste from the brochure and randomize the list so that you aren't exhibiting an alphabetical bias and how do I want you to re sort the list by expense ratio war by historic volatility such as the sharp ratios Sharpe ratio invented by William Sharpe whose co founder here at Elden financial engines Nobel Prize winning economist who developed volatility measure known as the Sharpe ratio because history tells us that lower cost funds tend to generate higher returns than higher cost funds and that funds with lower volatility tend to outperform funds with higher volatility course past performance is no guarantee of future results we all understand that but if you're gonna sort of list instead of doing it alphabetically and you don't know how to properly select your investments and you're not going to ask a professional financial advisor for help if you work for an employer has hired financial engines we're here to help you do that but if you work for an employer that doesn't provide such services and you are on your own and you don't know how to do it then sorted by expense ratio or volatility measures such as the sharp ratio and the fact that you're getting it wrong is evidenced by this year the S. and P. five hundred so far this year is up over twenty five percent this is the best year we've had in the stock market in six years and yet investors have withdrawn hundred thirty six billion dollars from U. S. stock funds this year it's the biggest withdrawal on record they've withdrawn money out and they've put the money into bonds and money market funds in fact in a recent poll from the American Association of individual investors only thirty six percent are optimistic about the stock market despite the fact this is the best year we've had in six years despite the fact that unemployment is at the lowest rate since nineteen sixty nine despite the fact that interest rates are among the lowest levels ever investors for some unknown reason are extraordinarily negative helps explain why sales of annuities fixed indexed annuities are up thirteen percent this.

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