The 30 Minute Rule: Self-Directed Investing in Your 401k Blog Feature {% if subscribeProperty|lower == "yes" %} {% else %} {% endif %}
Greg Carpenter

By: Greg Carpenter on April 17th, 2013

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The 30 Minute Rule: Self-Directed Investing in Your 401k


Recently, the New York Times Dealbook ran a piece on bitcoins which featured two of the Frugster’s favorite capitalism characters, Cameron and Tyler Winklevoss (who?), better known by their Zuckerbergian nickname “the Winklevii.” If you’re like me, you might be wondering what a “bitcoin” is. Good question. I’ve spent about an hour on the bitcoins site and I am thoroughly confused. According to, bitcoins are electronic currency with no underlying central authority. Normally, I wouldn’t bother to spend much time discussing what many people think amounts to another Dutch tulip bubble, but for bitcoins, I’ve decided to make an exception in the interest of discussing self-directed investing in 401ks.

In a previous post, you may remember that I offered my two more important tips investors should consider when thinking about 401k fees and investments:

1. Do your research on each investment option before you invest
2. Never invest in something you don’t understand.

Well, thanks to the current curiosity and media attention over bitcoins, I’ve decided to add a frugal corollary to Rule #2. The Frugster calls it the 30 Minute Investment Cap, and unlike bitcoins, it’s a very easy rule to understand:

Never invest in something you don’t understand after 30 minutes of research.

I’m not saying that all your research be completed in 30 minutes - I’m saying just to get an understanding of what you are buying. If you have to spend more than 30 minutes I would humbly suggest that it is not the right investment for you. There are a many gray areas in life, but when it comes to most important investment decisions, I like clarity and transparency. If you have a 401k plan with self-directed investing, you must know what you are investing in without a trace of confusion. A few minutes of research and/or explanation from a trusted source or advisor should yield a basic understanding. More than that? You’d best consider walking away.

For small business owners who have a 401k plan with self-directed investing, I’ll bet you already adhere to the 30 minute rule without even realizing it. We see it with our clients at Employee Fiduciary all they time: they simply don’t have the time to endlessly mull over complicated investment opportunities or watch 90 minute infomercials touting impossibly large, fast returns. Our clients are interested in growing steadily with the market by making wise (read “boring”) investments that will result in a comfortable retirement at the end of their careers.

Don’t misunderstand: self-directed investing in 401ks is a good thing, one that the Frugster encourages among those small business owners who have done their homework and know what they want.

Talk to me - commenting is free, no bitcoins needed ;) Unless you are the Winklevii, in which case, I’d like to hear about the investments in your 401k and how long it took you to select them.


About Greg Carpenter

Greg Carpenter founded Employee Fiduciary in 2004. With 29 years of experience in accounting and finance, Greg has brought his expertise to a variety of advisory, senior and executive management roles. Greg has worked for a national accounting firm, a Fortune 500 plan sponsor, a major brokerage firm, and he served as the CEO of a major 401k TPA firm. He is a CPA and earned his BA from Yale and his MBA from The University of Chicago Booth School of Business.