Don't make this common mistake when picking investments for your 401(k). (via CNBCMakeIt)
When it comes to picking investments, first isn't always best. Yet 401 investors are more likely to invest in mutual funds "early in the alphabet," according toFunds beginning with A, B and C, in other words, are more likely to be selected by investors than those that begin with a letter later in the alphabet.
The average 401 plan offers 19.8 fund options, according to the report, and the more options there are, the more likely participants are to choose the top-listed funds. But the so-called "alphabeticity bias" occurs even when investors aren't given many investment choices in their 401 plan, the researchers behind the report found.
comes into play because most 401 plans list their mutual fund options in alphabetical order, and investors look through them in that order. The researchers found that increased financial education and more resources to help workers with their investment decisions did not counteract the alphabet bias.
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