Newspaper article THE JOURNAL RECORD

401(k) Accounts Increasingly Include Brokerage Option

Newspaper article THE JOURNAL RECORD

401(k) Accounts Increasingly Include Brokerage Option

Article excerpt

NEW YORK (AP) -- Company 401(k) plans traditionally have allowed participants to pick investments from a limited list of mutual funds.

But plan sponsors increasingly are adding what's known as a "self- directed brokerage option" that lets workers use some of their retirement savings to buy stocks or to invest in mutual funds that aren't on the sponsor's core list.

A recent study by Cerulli Associates, a Boston-based research firm, found that about 15 percent of 401(k) plans now include a brokerage option, according to Cerulli consultant Joshua D. Dietch. Just 4 percent of 401(k) assets currently are invested via these options, he said, but that figure is expected to increase.

Under a self-directed option, plan participants can buy and sell securities as they please. So does this mean a lot of Americans soon will be day trading their retirement funds?

Experts doubt many investors will take that route.

For one thing, most people tend to be relatively conservative in investing their retirement savings, basically following a buy-and- hold strategy that financial planners have long advised is the best way to maximize the return on savings.

For another, many companies that allow stock trading in 401(k) accounts do impose limits, for example capping the assets that can be put into the market at 20 percent or specifying a maximum monthly dollar amount, said Virginia Karablacas, division manager for the Wilmington Trust's employee benefits group.

In addition, going into the stock market means paying brokerage fees and investing time, notes Dallas L. Salisbury, president of the Employee Benefit Research Institute in Washington, D.C.

"The moment you move into individual securities, you have to be willing to spend your personal time monitoring your portfolio, keeping track of the news," he said. "If you only hold five stocks and one goes through the floor, you're in trouble. …

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