It’s the time of year when many of us make an effort to do better—eat healthier, exercise more, try something new. As the holiday bills come rolling in, financial goals may be on your participants’ minds as well. In a recent message to investors, I touched on a few resolutions to keep in mind this year. None of them will be a surprise coming from Vanguard, but my hope is more investors will take these themes to heart in 2016 and stay focused on the aspects of investing they can control.

Save more and pay less. The most important (and difficult) step participants can take to shore up their financial future is to save more than they think they’ll need. Today’s investing challenges require a renewed commitment to saving. We’re living in a slow-growth world, and Vanguard expects investment returns to be modest in the coming decade. For example, a 60% equity/40% bond portfolio has earned an average return of 8.6% since 1926. We expect the central tendency of returns for that same portfolio to generate a 5%–7% return over the next ten years. When you take inflation into account, the average real return falls into the 3%– 5% range.¹

Your participants can’t control market returns, but you can help them control how much they pay to invest. Think of cost as a percent of your participants’ returns. If a fund returns 4% but charges a 1% expense ratio, then a participant loses 25% of their return to fees.  Every dollar a participant can save in fees is a dollar they can put toward their retirement.

Stay balanced and diversified. Market volatility is always with us. Many of the conditions that contributed to fragility in 2015—sluggish global growth, geopolitical events, and economic uncertainty—will continue to influence the markets in the years to come. Investors can temper the effect of volatility by staying balanced among stock, bond, and money market funds, and by being diversified within those asset classes. It’s worth emphasizing that even in a time of low (and rising) interest rates, bond funds can bring an important element of stability to a portfolio.

Stay the course. Sounds easy, but we know otherwise. It never feels good to watch the markets go down, but it’s also part of being an investor. Despite what some pundits might say, no one can accurately time the highs and lows. As plan sponsors, you play a critical role in helping your participants avoid the temptation to make changes to their portfolio in response to ever-changing market conditions. Through automatic enrollment, appropriate default savings rates, target-date funds, and ongoing education programs that nudge participants in the right direction, you’re helping employees overcome natural biases that work against their long-term aspirations.

On the surface, these financial resolutions may seem simple, straightforward, and a little bit boring, but sticking to them in good times and bad can be hard for participants. Help them tune out the headlines and hype, and keep them focused on the aspects of investing that are firmly within their control. We’re here to support you every step of the way.

¹Source: Vanguard economic and investment outlook, December 2015.


  • All investing is subject to risk, including the possible loss of the money you invest.
  • Investments in bonds are subject to interest rate, credit, and inflation risk.
  • Diversification does not ensure a profit or protect against a loss.
  • Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target-date funds is not guaranteed at any time, including on or after the target date.