Shouldn’t younger employees have different portfolios than older ones?
A common non-fiduciary practice is to encourage participants to choose investments based upon their “risk profile.” Conventional retirement plan wisdom says that younger employees can or should presumably take more risk than older employees. The flaw with this thinking is that personal risk tolerance is a fluid thing that changes daily. It is very expensive to monitor risk profiles regularly and nearly impossible to get a correct measurement on a participant-by-participant basis. By establishing a risk profile for the trust as a whole, all participants receive identical returns – i.e. returns that closely track the market as defined by the investment policy statement. This approach is both prudent and intelligent, and is consistent with true fiduciary principles for all participants.
