Professional investors often explicitly or implicitly claim to understand the fundamentals of finance theory. They may, for example, base allocation decisions on historical returns, volatility, correlations of returns across funds or asset classes, investment fees, industry outlooks, or various other financial metrics. Most 401(k) participants do not have access to much of that information or are poorly equipped to benefit from it. They may be guided by recent historical returns, which are typically readily available and understood, even if incorrectly so. Funds with higher returns understandably appear more attractive to investors. However, the finance literature.
