December is a time when many people check in on their 401(k) investments and make adjustments. If you have recently reviewed the investments your 401(k) plan includes, and tweaked your asset allocation as you saw fit, good for you. The $4.4 trillion currently invested in 401(k)s represents a significant portion of most Americans' retirement savings.
There is just one catch: simply holding several different funds doesn't make you diversified, and may leave you with more risk in your portfolio than you expect. And if your 401(k) plan has a lot of choices, it may be hard to tell if you have hit that snag.
The average 401(k) plan now offers 25 investment choices, according to newly released research by the Investment Company Institute and BrightScope. Some financial experts think that is a few too many.
"Sometimes, if you give [employees] too many choices, they wind up buying a little bit of each of the portfolios, and they end up not really diversifying," said Sean Keating, a financial advisor with Patriot Financial Advisors.