Attention pays off for 401(k) investments

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It isn’t news that paying attention to your investments can translate into more money. However, how much more now has a number: According to a study that was published in May 2014 by National Bureau of Economic Research, which is a nonpartisan organization, investors who follow the stock market and read financial newsletters add an average of $125,000 to a typical 401(k) retirement fund.

During a 30-year work career, that’s $625,000, compared with $500,000 for investors who don’t stay informed.

Informed investors earn 1.3 percent more annually in their 401(k) plans than do those who don’t keep up with investment news, says Annamaria Lusardi, who is a professor of economics and accountancy at The George Washington University School of Business and who is a co-author of the study.

The study found that people who earn more on retirement investments invest more in stock funds rather than bond funds, Lusardi says. Further, she says, more-successful investors pay attention to management fees.

Consequently, the study found, they were more likely to invest in index funds, which charge only about 10 basis points, or one-tenth of 1 percentage point, as a fee, compared with managed mutual funds, which typically have management fees of 1.3 percent to 1.5 percent.