401k mutual fund performance & 401k mutual funds

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Mutual funds are the #1 choice of 401k investors.
Mutual fund investments are popular with 401k investors for several reasons:

Most mutual fund investments convert quickly and easily to IRA rollover accounts held at the fund company. The investor can keep the same investments and pursue the same investment strategy as with the 401k even after terminating employment.
They have exchange privileges that allow investors to transfer money between portfolios within a fund family at no charge or for only a nominal bookkeeping charge.
They are priced on a daily basis, and it's easy to order printed statements.
They are usually offered in more than one class of shares. Investors can weight investment amount, anticipated holding period and other relevant factors in deciding which class of shares to purchase.
Most fund groups offer 24-hour-a-day telephone access to 401k account information.
It's easy for investors to access historical and current investment performance and portfolio details by calling the mutual fund companies directly and speaking with an account service representative or requesting prospectuses on the investments.
There are more than 6,500 different mutual fund portfolios available today -- that's double the number available just 10 years ago and nearly 15 times the number available in 1997.
An estimated 67 million U.S. households -- nearly 25% -- invest in mutual funds, either directly or through a company-sponsored 401k plan.
"Generation X" (ages 18 to 30) has the lowest level of household assets yet the second highest proportion of financial assets in mutual funds.
The flexibility afforded by mutual fund investments is very important to 401k investors, whose goals and retirement savings strategies can change dramatically during the often decades they participate in various 401k plans.

It's easy to get mutual fund performance information.
Performance information adds to your knowledge about an investment gained from reading the investment's prospectus. The three most common ways to get specific investment performance information are:

Contact the mutual fund company directly.

Each fund group's toll-free phone number is listed with a selection of suitable 401k investments in this website; choose Class A, Class B, or Class C, when its page pops up, click View, then click on the name of the company whose investments you're interested in.

Utilize free online mutual fund rating services.

A web search for "investment ratings" will bring up dozens of independent, consumer-oriented mutual fund rating services. Morningstar (www.morningstar.com), Standard & Poor (www.ratings.standardpoor.com), Value Line (www.valueline.com), Mutual Fund Investor's Center (www.mfea.com), and Smart Money (www.smartmoney.com) are five of the most popular sources for independent, unbiased ratings and comparisons; they have solid reputations but are by no means the only reliable services.

Utilize your favorite web browser or search engine.

All have quick access to mutual fund information. Please refer to your particular browser/search engine for details.

Keep in mind...

Most rating services charge for certain types of performance information.
Performance information received from mutual fund companies is generally free.

A few comments about risk, return and investing
Investing is a risk-return dichotomy. Mutual fund money market investments are considered very safe, and offer a relatively low, predictable rate of return, although that return, like any, cannot be guaranteed. At the other end of the risk-return dichotomy are mutual funds that can be extremely violate, offering investors the possibility of dramatic gains (and losses). Mutual fund investments can lose value in a volatile market -- just as they can gain value.

Shares of mutual funds are not deposits of or guaranteed or endorsed by, any financial institution; they are not insured by the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, or any other agency, and they involve risk, including the possible loss of the principal amount invested.
In general, the more volatile a mutual fund investment (i.e., the less predictable its rate of return), the more POTENTIALLY lucrative its earnings. More volatile investments are considered to be more risky investments.
The investment return and principal value of an investment will fluctuate. An investor's shares, when redeemed, may be worth more or less than when purchased.
In selecting the mutual fund group for your 401k plan, it's important to include a spectrum of investments:

Include a money market fund for conservative investors seeking capital preservation.
Include some lower-risk equity and bond portfolios.
Include some medium-risk equity and bond portfolios.
Include some high-risk/potentially-higher-return equity and bond portfolios.

In this way your 401k plan will appeal to employees interested in amassing any of a variety of portfolio mixes. Employees can select portfolios that match their investment experience, temperament and objectives.

The above is not meant as a cookie-cutter formula for arriving at your 401k investment mix. It is a good idea to consult a professional tax and/or investment advisor in making your final decisions. We can help, too.

A few comments on frequent trading of mutual funds
According to the Investment Company Institute, the mutual fund industry's trade association, for the twelve months from July 30, 1999 to July 30, 2000, approximately 42% of assets in the average stock mutual fund were bought or sold, meaning only a bit more than half the money in the fund actually stayed put for that period. That is up from approximately 40% turnover for the 12 months prior. Some retirement plan experts believe some of this fast trading is occurring in 401k plans.
According to most academic studies, frequent trading of mutual funds to squeeze out a few percentage points of gain a bad idea. Studies confirm what has been suspected by professional money managers for years---namely, frequent mutual fund trading usually hurts long-term returns.
As reported in the Wall Street Journal, one recent study* by University of California, Davis assistant professor Terrance Odean and professor Brad Barber found that investors who traded mutual funds most frequently had the worst returns for a five-and-a-half year period ending December 1996. During that period the average household earned an annualized return of approximately 15.3% from their mutual fund investments. Frequent mutual fund traders earned an average annualized return of only 10% for the same period.
One of the helpful features of Advisors 401(k) is that it tends to restrain frequent mutual fund trading by less-sophisticated investors, while at the same time allowing virtually limitless trading of stocks, bonds and funds by more sophisticated investors. How? With Advisors 401(k) you can offer your employees a choice of top-name mutual funds and in the same plan offer self-directed brokerage accounts. Trading mutual funds requires the employee to submit an updated enrollment application for processing; the self-directed brokerage accounts are accessed directly by employees without the need of an enrollment form.
*Source: Wall Street Journal, September 22, 2000, Lucchetti, Aaron, "Frequent Trading Worries Fund Firms."

Looking for a mutual fund group we don't list?
Contact us if you don't see the mutual fund group you want when you view the Class A, Class B, and Class C mutual fund listings.

Call us at (800) 660-0050, or
Contact us via e-mail.

There's a good chance we can add your request to our listing!

A word about mutual fund expense fees.

All "load" and "no load" mutual fund investment companies charge their investors annual "management fees" to cover the fund's operating expenses. Management fees cover such mundane expenses as auditing, recordkeeping, administration, mailing of statements, advertising, providing telephone support, investment managers salaries, commissions to brokers, etc. Typically these management fees, which are automatically deducted from each investors account, range from a low of 1/2 percent to a high of 2 percent annually.
Some mutual fund investors incorrectly believe management fees are set and regulated by the federal government, and one company's fees are like another's. In fact, management fees are set independently by each mutual fund company, and the impact of these fees over time can be quite significant.

The impact of "hidden" 401k fees on your savings.

All The Labor Department is currently auditing 401k plans of all sizes because of a trend they think may violate current pension laws. Many companies, especially smaller businesses, are shifting plan administrative expenses to plan participants, knowingly or unknowingly. This shift of plan expenses come in the form of "hidden fees" that are routinely deducted from each participants' retirement savings by some plan providers and investment providers. Because of lax reporting requirements, no one really knows how much money changes hands behind the scenes, but it is estimated that excessive fees may be as much as $1.5 billion per year, and growing.
In the 401k arena expense fee disclosure, whether to plan participants or plan sponsors, has been notoriously confusing and unclear. The impact of excessive hidden fees on plan participants' retirement accounts can very significant over time. As example, consider a hypothetical 401k investment such as a mutual fund, with deducted expense fees of 1.3 percent versus one with fees of just .3 percent. Applied to an initial 401k investment of $5,000, with regular annual investments of $5,000 returning 10 percent, and compounded over 15 years, the difference between the "low-fee" investment and the excessively "high-fee" investment adds up to $15,398. That's a significant sum deducted from your retirement savings to pay for administrative functions.
Policymakers and plan sponsors seeking to structure well managed 401ks for their aging workforces are beginning to acknowledge the negative impact significant hidden fees has on eroding pension accumulations for retirement. What might appear to be a small difference in pension management fees can result in substantial differences in eventual retirement benefits.

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