Trading account newsletters are a recent trend targeting participants of 401ks. These newsletters encourage participants to make frequent trades in hopes of taking advantage of recent market changes to increase the value of their investments. Those participants who are considering advice from these newsletters might not be aware of the historically poor results of trading systems or the penalties that can be assessed to 401(k) participants for frequent trading. According to an article in Employee Benefit News, mutual fund families have the right to charge redemption fees, lock up balances in certain funds, or prohibit transfers for participants who exhibit behavior of frequent trading. Frequent traders have a negative impact on the Plan by increasing costs to the Plan and decreasing returns.
Have you noticed any recent increases in trading in your 401(k) Plan?