Defined Contribution plan participants know retirement is a long-term goal, but sometimes their investment decisions can be shortsighted. With easier access to real time investment information, participants can see every zig and zag in the financial markets and watch their account values change daily.
Unfortunately, this can lead to reactive, short-term investing, or a follow-the-pack mentality. As evidence, during the global financial crisis (October 2007 to February 2009) $208 billion flowed out of equity funds in the last 12 months of the downturn. Then, from March 2009 to December 2013 $161 billion flowed into equity funds during the last 12 months of the rebound. The sellers likely sustained losses, and the buyers probably missed participating in a significant part of the upswing.