401(k) / 403(b) Investment Options
Most 401(k) plans only have 15-20 investments to choose from. This limits the asset classes that we can include as many 401(k) plans do not offer much in the way of small caps, real estate, emerging markets, or different bond exposure like high yield, inflation protected, and global bonds.
It can also affect the quality of the funds we use in your portfolio. It may mean paying a higher expense ratio, having less diversification, and/or using a strategy that we might not otherwise choose without the constraint of limited investment options.
The same can be said of 403(b) plans. These are often administered through an insurance company and many times we find the investment choices are less than desirable.
We work around these constraints by trying to pick the best funds available and using the rest of the portfolio to fill in the rest of the target allocation.