Auto Invest

Automatic portfolio selection (Auto Invest) and ongoing professional management is another behaviorally based solution. It helps avoid human tendencies like chasing hot performers, investing too conservatively, diversifying naively, never rebalancing and holding on to losers too long.

Target-date retirement portfolios can be simple, cost-effective investment choices for most plans. These portfolios are professionally managed, so they require minimal action by the participant throughout the entire process. Used as automatic default investment options with participant contributions fully invested in the most appropriate portfolio, they can be very effective.

These portfolios are relatively easy for participants to understand and select. If plan sponsors do not want to automatically default participants into a portfolio based on expected retirement dates, the only decision participants must make is when they want to retire.

However, Auto Invest alone only solves one of the three behavior gaps preventing employees from securing their retirement.  In order for it to be as effective as possible, it needs to be paired with Auto Enrollment and Auto Increase.

 


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