Mutual Funds

Recently, we published an article on 4 mutual funds with consistent performance that investors could count on for their retirement savings. When it comes to consistency in investment, it is not only the consistency of fund or investment performance that matters, consistency on the part of the investors is also of importance. That is why Ben Garnham, a British born American investor, economist, professor and the father of value investing, had this to say,

“The individual investor should act consistently as an investor and not as a speculator”.

There seems to be a general consensus that investors who consistently invest and remain invested in one type of pension plan or the other, stand to accumulate more over time. According to a report by the Investment Company Institute, consistent 401K participation leads to higher account balances.

The Investment Company Institute (ICI) is the leading association representing regulated funds globally, including mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and similar funds offered to investors in jurisdictions worldwide. On the other hand, 401k is a type of retirement savings account very much like the RSA and Retiree accounts that exist in Nigeria. It is a tax-qualified, defined-contribution pension account used by most employees in the United States.

According to the said report, the average 401k plan account balance of consistent 401k participants more than doubled within the period covered by the report. The report defined consistent participants as those that remained active in the same 401K plan from 2010 to 2016. The report is the product of a study on “What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Account Balances, 2010–2016,” undertaken by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) in America. To come out with its findings, the study examined the account balances of 6.1 million consistent plan participants from 2010 to 2016. The research study found that the 401k account balances of consistent participants increased by 122% on the average.

Seen from another angle, the study found that “the average 401(k) plan account balance of the consistent participants grew at a compound annual average rate of 14.2 percent, from 2010 through year-end 2016”  However, the report also noted that asset allocation was of importance in achieving this laudable feat as “about two-thirds of 401(k) participants’ assets were invested in equities at year-end 2016—whether through equity funds, the equity portion of target date and non–target date balanced funds, or company stock”

On the rational for the study, Sarah Holden, ICI’s senior director of retirement and investor research said, “Tracking the account balances of a consistent group of 401(k) participants highlights the growth potential of this powerful savings tool,” She also noted that “These results demonstrate the benefit of persistent saving and underscore how 401(k) plans have become such a vital savings vehicle for millions of Americans.”

Lessons to Learn

The lesson to learn from this study and report is that it pays to consistently participate in whatever retirement plan you choose. It also pays to be consistent with your investment because by so doing, you stand the chance to benefit from the growth potentials of the investments.

Another lesson is that it is good to be a consistent investor rather than a speculator, just like Ban Graham has noted.

Finally, it helps to reiterate the seemingly known fact that asset allocation matters and is at the crux of investment performance. Nigerian investors should, therefore, be persistent in their savings inspite of the hard times, knowing that if it worked in America, it can work in Nigeria and that by sacrificing today’s luxury for tomorrow’s, your retirement will almost be guaranteed to be merry.

So start saving early, be consistent about it and watch your wealth grow.

Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. and (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.


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