Americans have an obesity problem, but it's not the one hanging over their money, it IS their money belt. Well, in the era of recession redux, it's not actually their money belt, it's their retirement portfolio. First, far too many mutual funds they invest in have exceeded the optimal number of securities in their portfolios (see "Overdiversification and the 401(k) Investor – Too Many Stocks Spoil the Portfolio," FiduciaryNews.com).
Academic research shows the optimized portfolio contains perhaps 30-40 stocks, while the typical mutual fund has 100 or more stocks. In fact, it's downright hard to find a good array of mutual funds with only 30-40 stocks.
Compounding the problem of mutual fund obesity is 401(k) obesity. Today's 401(k) plans, in a far cry from the three simple choices of the 1980's, often present an overabundance of investment options to employees.
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