We all know the minimum number of distinct and materially different investment options all 401(k) plans seeking the 404(c) safe harbor provision must have. This answer is three.
But until May 7, 2012, in its FAQ on the new Fee Disclosure Rule, the DOL has never opined on what the maximum number of options in a 401(k) should be. The number may just shock a number of 401(k) plan sponsors, in particular, those administering some of the largest plans.
Long ago, in a world motivate by the ideal rather than the banal, academic researchers sought the answer to this simple question: What is the optimal number of stocks the perfect portfolio should hold? The number crunchers of the day called this exercise "portfolio optimization" and its pursuit has a long and variegated history (summarized in most entertaining fashion here).
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