Most companies offer employees the option of contributing to a 401K retirement account. In addition to contributions of your pre-tax dollars, many companies match a percentage of your contribution up to a certain dollar amount. The idea is that investments in a 401K grow tax-deferred.

That’s great.

At tastytrade, we believe in self-directed investing. But most companies, however, when offering the ability to contribute to a 401K, give employees a list of mutual funds from which to choose. And most of those funds are so highly correlated to each other to make choice an illusion. The only self-directed investing being offered in this scenario is choosing whether or not to contribute and then into which pre-selected funds you want to place your money.

That’s not so great.  

We believe everyone is capable of making their own investments and trading their own money. Not only that, we also believe the best manager of your money is you. Fund managers, asset aggregators, money managers, whatever you want to call them, are compensated on bringing money in the door, not investment outcomes. So, is it smart to give control of your money away to a manager in exchange for that matching contribution and (hopefully) tax-deferred growth. It’s a tough call, but we encourage a third option: self-directed accounts in 401Ks.

While a few companies have begun to make the switch allowing employees to self-direct their 401Ks, we wonder why more companies are not? If you were intelligent enough for them to hire you, are you not also intelligent enough to invest your own money?

Cue The Beatles. Yes, John, we do want to start a revolution. We don’t want money from people with minds that hate. We just want to see companies allow employees to self-direct their hard earned money while continuing to offer contribution matching. Remove doubt about which firm manages your company’s retirement accounts so employees do not have to ask if the firm chosen, was chosen because they offered to pay for 401K order flow.