Have you heard of Valeant Phramaceuticals? Or how about the Sequoia Fund? Valeant is a drugmaker whose stock price has tumbled 70% this year on a potential accounting scandal. Sequoia is a mutual fund who took an out-sized stake in Valeant. Sequoia has fallen sharply, trails 98% of its peers, and their CEO just resigned.
Why should all this matter to you? First, if you’re employed at one of the 50+ American companies that offers the Sequoia Fund as a retirement plan investment option, you may be unwittingly part of this debacle. Second, if you’re lucky enough not to be directly impacted, you should take this as a lesson and an opportunity remove similar risks from your retirement portfolio.
Incredibly, the Sequoia Fund is one of the most widely held investment options for Walt Disney employees. It’s relatively rare for major employers to offer risky mutual funds like Sequoia that make concentrated bets. Such “high-octane” funds have no business being present in 401(k)’s and similar retirement plans. Plan sponsors could even face class-action lawsuits from investors caught up in this avoidable mess.
How can you protect yourself?
- Step #1: Educate yourself about what’s in your retirement portfolio.
- Step #2: Pivot toward a massively diversified portfolio that favors low-cost, tax efficient index funds versus expensive, actively managed funds like Sequoia.
- Step #3: Visit 401k.nstarcapital.com to access portfolio recommendations for +120 company retirement plans. Don’t see your company in the list? Shoot us an email (firstname.lastname@example.org) and we’ll add your plan!