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Comment by darth_avocado | Hacker News Reader

This is the biggest problem with retirement funds that no one talks about. There is so much money available that inevitably you end up with investments that are risky despite diversifying.

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One of the things that most frustrates me about pension funds and even 401k funds is how my retirement is managed by someone who has no concern for my values and could in fact use my money to oppose my values and best interest(as a whole) in the pursuit of increasing gains.

If your 401k does not have an option for low cost broad market index funds like SP500, then that is a fault of your employer forcing employees to take on extra risk.

Or it is the fault of the government for not letting employees have access to self managed IRAs while employed

Retirement accounts are not intended as general purpose investment vehicles. If everyone could put their 401k/pension in anything, you would see a lot more people getting scammed and gambling on the latest GameStop internet mania. If folks want to invest like that, get a brokerage account. If you want tax-advantaged retirement planning, being limited to less risky things is the tradeoff you make.

There is no reason Fidelity/Schwab/Vanguard/etc could not restrict accounts to certain investment options just like 401k are.

Also, IRAs already exist. No reason for an employer to be in the middle.

That is true, too. There is no reason an employer should be involved a person’s retirement or healthcare.

There's nothing stopping you from having both at the same time, with the caveat that your contributions to the IRA may not be deductible if you earn over a certain threshold.[1]

[1] https://www.nerdwallet.com/article/investing/can-i-have-a-40....

Or with increasing of ESG investing ignore possible gains for political reasons. Thus making my future life worse as they don't extract maximum possible value from market.

If you are frustrated with your 401(k) management, consider rolling it over to an IRA so you can direct it yourself.

https://www.biglawinvestor.com/partial-401k-rollover/

Most plans don't allow rollovers while you are still employed at the company.

Sure, I don't know the numbers but you're probably right. Hopefully the comment helps someone

Unfortunately this is a 'vote with your feet' situation. If you don't like who is managing your 401k, then work for another company (which is drastic, I know). The other option is to simply write to your plans administrator. Tell them your concerns and organize a letter writing campaign if you are really concerned.

Diversifying reduces risk, period. The question is whether the portfolio is diversified enough, relative to its size.

A lack of sufficient opportunity for diversification isn't a problem with the fund, it's a problem with the (investment) market. Offer more opportunities for diversification and the problem resolves. Too bad the economic trend is to consolidate businesses instead of keeping them separate; too bad entrepreneurship is declining; too bad more and more new companies decide to stay private instead of aiming for an IPO.

Why is it a problem with broad market index funds?

Some investments will underperform, and some will overperform. All you should care about is keeping up with inflation, which it should since it is invested in a representative set of the businesses that make up the market.

The risk becomes that the pension is holding up value and price discovery is damaged.

Oh so like a Japanese index fund invested in 1990?

Did they have 0.03% expense ratio global equity index funds in 1990?

Japanese funds have high dividend yield, I think like 5% and up returns are common.

Very annoying for the layperson that dividend returns are often much harder to find than stock value

Is it inevitable to own more than 4% of those two banks when you manage $100bn and the S&P 500 alone is 300 times larger than that?

The whole point of diversifying is because some investments won’t do well.

> you end up with investments that are risky despite diversifying.

Every 15 years some banks fail and we shake our heads. But by and large, investing in banks is probably one of the safest investments one can make, no?

You literally described the whole point of diversifying and spun it into a negative.

It’s hard to tell if you’re just being ignorant or deliberately trying to spread FUD.

Fund managers are also not regularly tested for drugs and gambling addiction. These jobs attract certain kind of people...

That's the point of diversification. To average out idiosyncratic risk.

Despite? Wouldn't it be because of?

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