and risk (especially since tax-exempt funds have no role in tax-sheltered
pension plans).
It is more difficult to say with any assurance what the ex ante welfare
costs to investors are of using simple rules of thumb to make their invest-
ment decisions. As the calculations in the previous section show, in some
cases these costs can be substantial, even if investors obtain a portfolio
close to the efficient frontier. And, though ex ante welfare costs are the
proper concept for economists to worry about in designing savings plan,
plan administrators (either private or public) may also be worried about ex
post regret. A plan that by design encourages investors to put an unusually
large or small proportion of assets in equities may suffer later if returns dif-
fer from historical norms.
NAIVE DIVERSIFICATION STRATEGIES 597