Toroso’s smart beta approach to 401 k investing

By Michael Venuto
Toroso Investments
Published in

In 2015, ETFs have continued to capture market share from mutual funds. But one area where mutual funds remain the dominant product choice is in 401(k) retirement accounts, and specifically in target-date funds.

Today nearly 75 percent of all new 401(k) assets are allocated to target-date funds that have average expense ratios of 0.84 percent, or $84 for each $10,000 invested, according to Morningstar’s 2014 research study. By the way, when 401(k)s using index funds are eliminated, and when you measure only active target-date funds, that average expense ratio jumps to 1.13 percent.

What’s more, 401(k) platforms charge other administrative fees that bring the average cost of a small 401(k) plan to 1.4 percent—and that’s without the inclusion of the cost of retaining a financial advisor or independent fiduciary.

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