Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



Few previous studies have explored how individuals manage their defined contribution (DC) pension plan assets, though these plans constitute an increasingly important component of retirement wealth. Using a valuable new dataset on over one million active 401(k) plan participants in a wide range of plans, we assess the impact of trading on investment performance in DC plans. We find that, in aggregate, the risk-adjusted returns of traders are no different than those of nontraders. Yet certain types of trading such as periodic rebalancing are beneficial, while high-turnover trading is costly. Interestingly, those who hold only balanced or lifecycle funds, whom we call passive rebalancers, earn the highest risk-adjusted returns. These findings should interest participants in such plans, fiduciaries responsible for designing DC pensions, and regulators of the retirement saving environment.

Working Paper Number


Copyright/Permission Statement

Opinions expressed herein are those of the authors alone, and not those of The Wharton School, Vanguard, or any other institution which whom the authors may be affiliated. ©2006 Mitchell, Mottola, Utkus and Yamaguchi.


The authors thank the seminar participants in Singapore Management University for helpful comments. They are grateful to Vanguard for the provision of recordkeeping data under restricted access conditions; and to the Pension Research Council at the Wharton School and Vanguard for research support.

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Economics Commons



Date Posted: 28 August 2019