The more important answer is “I’m not an investor” — and neither are you. Just because you have a 401k plan does not, ipso facto, make you an investor. This is a serious problem with defined-contribution pensions in general: they place an onerous set of responsibilities onto individuals who are wholly unqualified to discharge them in a sensible manner. Already, such plans tend to have far too many choices, many of which are expensive long-only mutual funds which seem like a pretty bad idea for just about anybody. Trying to add alternative investments in private equity or hedge funds to the mix would almost certainly be disastrous — the dumb money coming in at just the wrong time, just like it always does.
I always kind of worry paying a management fee for investing in TIPS (i.e. my retirement fund does not let me buy individual bonds). The yield on these bonds is already pretty low and paying a percentage of assets in order to invest in this instrument makes it a far less efficient vehicle for investment. But it's also true that I have neither the expertise nor the information network to invest intelligently (beyond some basic, general principles) in the general market.
I always find it odd that the employer (who does not directly benefit from the results of the investment) picks the funds that are available. Market forces only work well when the customer (in this case the individual employee) is able to make free choices. But, unfortunately, the lack of information makes it impossible for the average employee to know if they are getting a good return.
So, in the end, only the fund managers really seem to benefit from this arrangement.
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