What’s the biggest omission you see in 401(k) investment menus?

    LARRY ZIMPLEMAN: I would say there are often two mistakes that are made in selecting 401(k) menus. The most common mistake that plan sponsors make is to offer too many choices to their employees. Research shows that if the number of investment options exceeds about 10 to 12, it becomes very confusing for employees and poor choices are often made. Also, when there is a large number of options, the options often overlap each other and it makes proper asset allocation more difficult.

    The second mistake that is often made is not including some sort of alternative investment that may not be correlated with stock or bond investments. One example of this might be a commercial real-estate or real-estate investment trust (REIT) account.


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