Sin #4 – Sloth
Chasing the hottest mutual fund of the moment can be bad news, but that’s not to say 401k investors should just set their retirement portfolio and forget it. One of the worst things for your mutual fund portfolio is to just let it sit there for 30 or 40 years until it’s time to retire.
Some of the pitfalls are obvious — missing out on opportunities and staying in bad funds are at the top of the list. But there are many other reasons to stay on top of your mutual fund investments. An aggressive fund that is wildly profitable could leap from 10% of your nest egg to 20% or 30% in a few years. Those profits should be reallocated before they disappear. Or a great fund in your portfolio may announce a change in management — meaning the future holdings and strategy of this investment won’t be what you signed on for.
Yes, 401k investing is long term and is not meant to be treated as a day-to-day trading exercise. But that’s no reason to sit on your hands for a few decades and hope for the best. Take an active role in your retirement and read those quarterly statements carefully!