1) Is Auto-Enrollment ‘Not Optimal’?
ASPPA | 3/8/2021
Because… Though the research paper argues that automatic enrollment (AE) may not be optimal for young adults, we still believe that this DC plan feature makes sense for all plan participants, including younger workers. First, it helps people fight against inertia. Admittedly, the young generation has lower incomes and higher debt at the beginning of their career. They most likely need to pay off their loans in addition to covering various expenses in their daily life. But if they are defaulted into a plan with AE, they are forced to learn how to evaluate their overall financial situation, set priorities and long-term goals, stick to their budgets with more self-discipline, and manage their finances wisely. Second, young people have a longer time horizon. Starting early gives them more time to grow their assets and enables them to benefit from the power of compounding with tax-deferral.
2) Style Bias and Active Performance
Standard and Poor’s | 3/13/2021
Because… The S&P research shows that 62% of large-cap growth funds, 83% of mid-cap growth funds, and 86% of small-cap growth funds topped the S&P 500 Growth, S&P MidCap 400 Growth, and S&P SmallCap 600 Growth, respectively, in 2020. Meanwhile, 67% of large-cap value funds, 47% of mid-cap value funds, and 56% of small-cap value funds beat their respective S&P benchmarks. However, all categories among actively managed U.S. Equity mutual funds experienced net outflows last year, regardless of market cap size and style orientation. Active Large Growth mutual funds bled $79.2 billion, 60% higher than outflows of $49.5 billion from their Large Value counterparts, although the S&P 500 Growth Index returned 33.5%, significantly higher than the S&P 500 Value Index’s 1.4%. In the mid-cap arena, redemptions of $19.7 billion from active value mutual funds were 36% higher than those from growth funds. Small cap funds followed the same trend. The substantial outflows of every U.S. Equity category indicates that many investors have given up on actively managed mutual funds even when they outperformed their indexes.
3) Fidelity Surpasses $10 Billion in Health Savings Account Assets
Fidelity | 3/15/2021
Because… HSAs saw healthy growth again in 2020. Devenir reported that HSA assets reached $82.2 billion at the end of 2020, increasing 25% from a year ago. It also revealed that HSA contributions outpaced withdrawals last year. The HSA expert projected the assets to rise to $127.5 billion by the end of 2023. Fidelity has been a leader in the HSA space. It was the first large brokerage firm to provide HSAs for individual investors. In January 2020, it became the first to offer full-service HSAs to financial intermediaries. Fidelity charges no fees to spending account holders and requires no account minimums. It also keeps the all-in fee extremely low for investing account holders. In addition to the cost advantage, it offers strong investing options, fractional shares, and cash options, which has combined to make Fidelity more competitive than its peers. With its assets surpassing $10 billion, we believe Fidelity will continue to have bright growth prospects in this market.