According to an article in Employee Benefit News (EBN), new research recently published by Fidelity reveals that the fear of making a bad investment decision results in participants investing more conservatively than they should, producing lower returns and reducing the chances participants will reach retirement age with enough to fund their retirement.
Fidelity found that participants who review their portfolio more often are more conservative in their investments. Participants are more likely to check their investments when the market falls and fear of experiencing more losses causes participants to sell their current investments and elect more conservative investments. Fear of potential but uncertain events, what EBN refers to as ambiguity in the market, also prompts participant conservatism.
To avoid participant conservatism due to fear of ambiguity in the market and reactions to market fluctuations, participants should stick to age appropriate asset allocations. The message- stay the course and focus on the long term investment goals. EBN reminds participants that they should be long-term investors, not reactive to current events, for 35 of the 40 years of their career.
Have you noted an increase in changes to participant investment portfolios when the markets fluctuate?