Studies show that the single biggest factor for low participation in 401k plans is the fear of investing and not having a clear understanding of the investments in the plan. Thus, we use model portfolios to enable 401k participant education to focus on saving as opposed to investing.
In the Revolt plan, model portfolios are managed by our independent investment advisor. All the employee has to do is select the “bucket” that’s right for him. He is taught to be a saver, not forced to become an investor. He answers a simple risk questionnaire to discern his risk tolerance – conservative, moderate or aggressive. Then there are 4 different “time horizons” – fewer than 5 years to retirement, 5-10, 10-15 and more than 15. The participant is coached to “set it and forget it” except as his time horizon changes – and he is reminded of that quarterly. This creates a “grid” of 12 portfolios, or, "buckets" as we like to call them.
The buckets are constructed from 11 underlying funds, 8 of which are low-cost index funds. Our advisor uses low-cost actively managed funds for diversification when index funds are not available for a particular asset category.
If you're interested in learning more, click here to request a proposal from us!