February’s Retirement Report includes some interesting topics. The first talks about 3 funds recommended for all retirement plans.  Behavioral Economics teaches many lessons. First, sometimes less is more. Nowhere is this truer than in retirement plans, where offering fewer funds drives greater participation and less confusion. When building an optimal retirement plan, we continuously conclude the ideal number of investments to be three – three index-based fund options, that is.

The next topic talks about the importance of a qualitative review of the funds inside your plan.  The qualitative review of a mutual fund helps support the quantitative analysis within the Scorecard System™ by providing color and insight into the portfolio and the investment performance.

• Global markets remained tense this week as the continuing standoff between Russia and the West on the issue of Crimea weighed on sentiment.

• Chinese data on exports, industrial production and retail sales disappointed with the numbers for the January/February period painting a picture of an economy that’s decelerating at a worrying pace.

• Unless the geopolitical situation deteriorates rapidly early next week, the Fed is likely to continue to trim bond buying by $10bn to $55bn per month, remaining of the view that much of the weakness in recent economic indicators has been weather related and economic growth will accelerate with the spring thaw.

• The acceleration could be helped along should the recent Senate proposal to extend jobless benefits retroactively for another five months pass Congress.  See Bottom Line

The first Retirement Report of 2014 includes some interesting topics, including an evolving investment option inside some 401k plans-Retirement Income Solutions (RIS) are retirement plan investment options designed to generate a post retirement income stream from participant accumulated retirement savings and include guarantees of minimum withdrawal amounts for life.The next topic is regarding specialty asset classes inside 401k plans which are those which do not fall into the “core” group of asset classes. Core asset classes include: U.S. domestic equities, international, and fixed income.  Are they worth the fiduciary risk? And finally understanding different Fee methods inside plans.  A plan fiduciary can elect to pay or allocate plan fees in a number of different ways. In fact, the DOL observed in Field Assistance Bulletin (FAB) 2003-03 that plan sponsors and fiduciaries have considerable discretion in determining, as a matter of plan design or a matter of plan administration, how plan expenses will be allocated among participants and beneficiaries.  January 2014

Diversification is the foundation of any sound portfolio. It’s how risk is controlled; a process of balancing potential negatives against potential positives and the tempering of uncertainty. Diversification buffers surprises, both good and bad. The financial media has coined the phrases “Risk-on” and “Risk-off” to identify positive and negative investment climates. “Risk-on” has certainly been an accurate description for the US stock market for 2013 and it appears, at least for now, 2014. Risk has its positive moments. Stocks just finished their best year since 1997. An allocation to bonds in a portfolio has been a way to balance risk as historically bonds have more consistent returns and more consistently positive returns. The last year bonds recorded a negative return was 1999; and now 2013. The stock markets have, as a rule, more consistently varied returns both positive and negative. Newsletter 12-31-2013