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Your 401 (K) Account at East Coast Yachts

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401(k) Account at East Coast Yachts
Elijah Clark
Walden University

401(k) Account at East Coast Yachts
A new company employee is seeking to sign up for the company’s 401(k) plan. The individual is trying to determine which investment option is the best. After gaining information from a colleague, the employee decides to invest in a diversified portfolio. However, the employee is confused on whether to select the Vanguard 500 index fund or equity mutual funds.
Assignment Questions The 401(k) Account at East Coast Yachts mini case asks to provide details regarding implications drawn from a provided graph for mutual fund investors. Additionally, the mini case asks whether the graph is consistent with market efficiency. Furthermore, the mini case seeks to understand the reason for making an investment decision for the equity portion of a 401(k) account.
Graph for Mutual Fund Investors
The general desire for an investor is to receive a return on their investments. The mutual fund has to outperform the market return in order to produce profits. However, mutual funds are unlikely to outperform the market because they usually have average market returns before expenses (Ross, Westerfield, & Jaffe, 2013). Considering the fund managers are responsible for making decisions and achieving results, they often take a high fee, which adds to expenses and deducts from the funds overall value. Additionally, no more than half of equity mutual fund investors are likely to outperform the market (Ross et al., 2013). Once the costs of the expenses are considered, the number drops to well below half. Consequently, determining whether the account is efficient is not important unless the mutual fund manager outperforms other investors and managers. Considering the average expense ratio, it is unlikely that the mutual fund manager would outperform the market (Ross et al.,

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