In 2006, Congress passed the Pension Protection Act. Among the objectives of that legislation was to address several major problems then occurring within 401k plans. One of those snags dealt with retirement investors’ tendency to be too cautious with 
their long term investments. We call this Common Mistake of Retirement Investors “Over-Cautiousness.” It means sacrificing long-term return for short-term “safety.” You’ll see why we put that last word in quotes a few paragraphs from now. First, a few facts you be interested in knowing.
According to the “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2011,” (
ICI Research Perspective, December 2012, Vol. 18, No. 9), in 2002, prior to the 2006 Pension Protection Act, only 40% of 401k plan assets were placed in equity funds. In 2007, this number rose to 48% (still not as high as the market peak in 1999 when 53% of 401k assets were held in equity funds). Following the market debacle in 2008/09, 401k equity fund holdings dropped to a low of 37%. As of 2011, and despite the market recovery, only 39% of 401k assets are invested in equity funds. This means a large segment of 401k investors have missed out on these returns, making it harder for them to meet their retirement objective.
Why is this so? What can be done to prevent this?
via fiduciarynews.com
BERK: What's safe? Never what the crowd thinks it is. “Right now bonds should come with a warning label.”
Warren Buffett
Fortune
February 9, 2012
Read for the following three reasons investors are too cautious with retirement accounts:
1. My Feelings are hurt
2. Fool me once
3. Safety First
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