[topic 1]

With 401k Easy Online You Select Your 401k Plan Investments

With 401k Easy Online, you have complete discretion over the investments offered within your 401k plan. There's no bundled, pre-set investment mix.

-- Select self-directed brokerage accounts from trusted names like Charles Schwab, Cigna Financial Services or Fidelity Investments to give your employees the widest array of potential 401k investments. (See our Self-Directed Brokerage Accounts page for more information.)

-- Select from more than 200 SEC regulated no load mutual fund families from trusted providers like Fidelity Funds, Vanguard Funds and Dreyfus Funds to give your employees a more concise yet amply diverse 401k investment selection. (See our No Load Mutual Funds page for more information and specific no load mutual fund investment family listings.)

-- Select BOTH a no-load mutual fund family and self-directed brokerage accounts, if you like. It's all your choice with 401(k) Easy Online!

back to page topics

[topic 2]

View Lists of Potential Investments

Our complete database of potential 401k investments is rather enormous, as you might imagine given our statement above in topic 1 of "...if the IRS says it's OK to receive 401k contributions, you can likey offer it within your 401k Easy Online self-service 401k plan."

Self-directed brokerage accounts and mutual fund families -- particularly of no-load mutual funds -- are by far the most popular investment approaches among our 401k clients. (See topic 4, below, for some of the reasons why.)

To give you an idea of the freedom you have in selecting your plan's 401k investments even from just within these two popular categories — and you're by no means limited to these two categories — we've included in this website access to partial listings of the self-directed brokerage accounts as well as no-load mutual fund families you can choose from.

-- To view a partial listing of self-directed brokerage accounts that are available for use with 401k Easy Online, click here.

-- To view a partial lisitng of the no-load mutual fund families that are available for use with 401k Easy Online, click here.

back to page topics

[topic 3]

Help Is Available With Choosing Your 401k Investments

Let's preface this by saying that we're not in the business of selling anything beyond your customized 401k plan and corresponding online plan administration and participation systems. 401k Easy Online receives no commissions, kickbacks, etc., from any brokers, investment houses or other investment-related agencies.

-- We strongly recommend you consult with a qualified professional in choosing your 401k plan investments. Any fees you incur are likely well spent.

-- Consider contacting an independent investment consulting service. Companies such as FinancialEngines, ClearFuture and mPower specialize in personal financial advice but are also qualified to offer advice on choosing investments for your 401k plan. For basic information about some independent retirement planning services, please go to our ERISA 404c page.

-- We've created a special page within this website to help clients work through choosing investments for their 401k plans. The page is called Four Steps to Choosing Your Plan's Investments.

-- Read Topic 4, below, about things to keep in mind when choosing your plan's 401k investments.

-- Feel free to contact us if you'd like additional input.

back to page topics

[topic 4]

Things to Consider in Selecting Your 401k Plan Investments

Here are just a few things to consider in selecting your 401k plan investments:

-- Your employees' current and projected investment goals.

-- Your employees' familiarity and comfort with investing.

-- Your employees' access to and comfort with the Internet (you wouldn't want to select only self-directed brokerage accounts for your 401k plan if any of your employees have very limited access to the Internet, since such is an integral part of self-directed brokerage account investment trading)

-- The types of investments you choose affects the fees your plan participants will be assessed, if any (by the mutual fund company and/or brokerage account company).

-- Self-directed brokerage accounts will give your employees access to most of the no-load mutual fund families available for use with 401k Easy Online, but there may be additional fees when going through the brokerage account (a fee by the brokerage company in addition to any fees assessed by the mutual fund company).

-- Investments with higher fees will need to perform better for your employees to yield the same return as would lower-cost investments. All sales loads and transaction fees as well as ongoing expenses (management fees, etc.) are listed near the front of each investment's prospectus. It is very important that you read the prospectus for any investment you are considering for your 401k plan (unless you're considering self-directed brokerage accounts, in which case it would be impractical to read every potential prospectus).

-- There are pros and cons to both self-directed brokerage accounts and no-load mutual funds. The below table highlights some of the most pressing concerns:

In selecting a 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 (see Topic 3, above). We can help, too.

back to page topics

[topic 5]

Mutual Funds Are Popular With 401k Investors

Mutual funds are available both via self-directed brokerage accounts and, obviously, as load or no load mutual fund families. The funds 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.

-- Mutual funds 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.

-- Mutual funds are priced on a daily basis, and it's easy to order printed statements.

-- Mutual funds are usually offered in more than one class of shares. Investors can weigh investment amount, anticipated holding period and other relevant factors in deciding which class of shares to purchase.

-- 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.

-- 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.

Important Information...

-- All mutual fund purchases are subject to a three (3) business day holding period; no exchange or liquidation is allowed within this three-day period. No-load, no transaction fee funds redeemed within 30 days of the purchase date may incur certain transaction fees. For regulatory reasons, investing in mutual funds is available only to U.S. citizens and permanent residents of the United States.

back to page topics

[topic 6]

It's Easy to Get Investment Performance Information

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

-- Contact the investment company directly.

-- 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 some of the most popular sources for independent, unbiased ratings and comparisons; they have solid reputations, but they're 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.

-- For specific help in selecting the investments for your company's plan please refer to the "How To Select Plan Investments" which recommends a 4-Step process to making optimal selections.

back to page topics

[topic 7]

Risk, Return, and 401k 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.

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 is a bad idea. Studies confirm what has been suspected by professional money managers for years — namely, that 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.

*Source: The Wall Street Journal, September 22, 2000, Lucchetti, Aaron, "Frequent Trading Worries Fund Firms"

back to page topics

[topic 8]

Important Information...

Nothing herein is an offer or solicitation to sell securities, products or services in any jurisdiction wherein their offer or sale is not qualified or exempt from regulation.

-- For mutual fund information, including investment policies, charges and expenses pertaining to the fund group, contact the mutual fund companies directly or contact us for the name of a qualified NASD-registered Broker/Dealer to assist you.

-- Many mutual fund companies offer online viewing of prospectuses.

-- Fund prospectuses are detailed descriptive documents about investments. They are published by the mutual fund company housing the investment and list all fees involved as well as other important information. They must meet stringent disclosure rules.

-- Fund prospectuses are always FREE and should be read carefully before investing any funds.

-- A fund's past performance never guarantees its future results. Performance history should only be one of several determining factors in choosing your plan's investments.

-- In addition to reading fund prospectuses in choosing your 401k investments, you may also want to request from the mutual fund company and read the fund company's annual and semi-annual report to shareholders for a clearer picture of the fund's investment goals and policies.

-- 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.

-- The investment return and principal value of an investment will fluctuate. An investor's shares, when redeemed, may be worth more or less than original cost.

-- All mutual fund purchases are subject to a three (3) business day holding period; no exchange or liquidation is allowed within this three-day period. No-load, no transaction fee funds redeemed within 30 days of the purchase date may incur certain transaction fees. For regulatory reasons, investing in mutual funds is available only to U.S. citizens and permanent residents of the United States. 401k participants may be exempt; you should check with your tax advisor if any of your potential 401k plan participants are not official U.S. residents.

-- Many load mutual funds are offered in more than one of three classes of shares (A, B and C). Classes differ in their pricing conventions and/or annual fees. Because there is wide variation even within a single class of mutual funds, reading prospectuses is the only way to be certain of particular investment's pricing and fee structure, regardless of its class. In deciding whether to choose a particular class of shares for your 401k plan, it is important to consider the amounts your employees will likely be investing, the shares' anticipated holding period and other relevant factors explained in each investment's prospectus.

back to page topics

[topic 9]

Watch for Hidden Fees

The US Labor Department is currently auditing 401k plans of all sizes because of a trend that 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 mutual funds. 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 these confusing hidden fees on plan participants' retirement accounts can be 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 "high-fee" investment adds up to $15,398. That's a significant sum deducted from a participant's retirement savings.

Policymakers and plan sponsors seeking to structure well-managed 401ks for their aging workforces are beginning to acknowledge the negative impact hidden fees has on eroding pension accumulations for retirement. What might appear to be a small difference in deducted investment fees can result in substantial differences in eventual retirement benefits.

back to page topics

[topic 10]

Common Investment Types

Money Market Fund:
A relatively low-risk mutual fund (when compared with others) managed to maintain a stable $1 share price/NAV. Investments in these funds are neither insured nor guaranteed by the U.S. government, and there can be no assurance that a fund will be able to maintain a stable net asset value of $1 per share.

Bond Funds (aka, Fixed Income Funds):
Mutual funds that have higher risks than money market funds but seek to pay higher yields. Not restricted to high-quality or short-term investments (as are Money Market Funds). Because there are many different types of bonds, bond funds can vary dramatically in their risks and rewards. Long-term bond funds invest in bonds with longer maturities (a longer length of time until final payout). The values of long-term bonds can go up and down more rapidly than those of shorter-term bond funds.

Stock Funds (aka, Equity Funds):
Mutual funds that generally involve more risk than Money Market or Bond funds -- but they also can offer the highest returns. A Stock Fund's value (NAV) can rise and fall quickly over the short term, but historically stocks have performed better over the long term than other types of investments. Not all stock funds are the same (e.g., Growth Funds focus on stocks that may not pay a regular dividend but have the potential for large capital gains; other specialize in a particular industry, such as technology).

back to page topics

[topic 11]

Common Investment Terms

Expense Ratio:
The annual fee charged to mutual fund shareholders (usually as a percentage of total investment) for the administration, operation and management expenses associated with a particular fund. May include management fees, 12b-1 fees and other fees, but does not include sales charges. Shows the actual amount that a fund takes out of its assets each year to cover its expenses.

Index:
Indicators of trends in markets, sections of the economy, or other economic indicators, such as precious metal or Treasuries. Some of the most common indices include the Dow Jones Industrial Average, the NASDAQ Composite and the S&P 500.

Investment Objective:
Indicates a particular fund's investment goals, based on the wording in the fund's prospectus.

Mutual Fund:
A collection of money invested in a group of assets (stocks, bonds and other securities) and managed by an investment company (a mutual fund company or other). The combined holdings of the stocks, bonds and other securities and assets the fund owns are known as its portfolio. Each investor owns shares of the portfolio; each shares represents a percentage ownership in the portfolio holdings.

Net Asset Value (NAV):
The per share market value (price) of a mutual fund; in general, the price offered to purchase one share of the mutual fund. The NAV in most cases is calculated by including the closing day's prices of all securities held in a particular fund, plus all other assets owned by the fund (including cash), subtracting all liabilities of the fund, and then dividing the sum by all the outstanding shares of the fund on that given day. If the fund is a no-load fund, then the offering per share price for the fund and the NAV per share will be the same.

Prospectus:
A fund's formal written statement, generally issued on an annual basis. In this statement the fund sets forth is proposed purposes and goals, and other facts (such as performance history and investment objective) that an investor should know in making an informed decision.

S&P 500:
The Standard & Poor's 500; a market value weighted index of 500 blue chip stocks. An index that's considered to be an overall benchmark of the market as a whole.

Ticker Symbol:
The letters assigned to a particular stock, option or mutual fund used to identify that particular security for trading or quoting purposes.

back to page topics

[topic 12]

Common Investment Objectives

Money Market:
Seeks stable income by investing in short-term IOU's. Yields reflect variations in prevailing short-term interest rates.

Government Bond--General:
Offerings that pursue income by investing in a combination of mortgage-backed securities, treasuries and agency securities.

Corporate Bond--General:
Seek income by investing in fixed-income securities, primarily investment-grade corporate bonds.

Corporate Bond--High Yield:
Seek income by generally investing 65% or more of assets in bonds rated below BBB. The price of these issues is generally affected more by the condition of the issuing company (similar to stock) than by the interest rate fluctuation that usually causes bond prices to move up and down.

World Bond:
Seek current income with capital appreciation as a secondary objectives by investing primarily in debt obligations issued throughout the world. These bonds are frequently foreign government issues.

Balanced:
Seek both income and capital appreciation by investing in a generally fixed combination of stocks and bonds. These funds generally hold a minimum of 25% of their assets in fixed-income securities at all times.

Asset Allocation:
Income and capital appreciation are dual goals for funds with this objective. Managers often use a flexible combination of stocks, bonds and cash; some, but not all, shift assets frequently based on analysis of business-cycle trends.

Equity-Income:
Funds expected to pursue current income by investing at least 65% of their assets in dividend-paying equity securities.

Growth and Income:
Growth of capital and current income are near-equal objectives for these funds. Investments are typically selected for both appreciation potential and dividend-paying ability.

Growth:
Funds that pursue appreciation by investing primarily in equity securities. Current income, if considered at all, is a secondary concern.

Emerging Growth:
Seek rapid growth of capital and that may invest in emerging market growth companies without specifying a market capitalization range. They often invest in small or emerging growth companies and are more likely than other funds to invest in IPS's or in companies with high price/earnings and price/book ratios. They may use such investment techniques as heavy sector concentrations, leveraging and short-selling.

Small Company:
Seek capital appreciation by investing primarily in stocks of companies with market capitalization of less than $1 billion. In this objective, income payments from dividends are unlikely.

World Stock:
Funds that invest primarily in equity securities of issuers located throughout the world, while maintaining a percentage of assets (normally 25% to 50%) in the United States.

Foreign Stock:
Funds that invest primarily in equity securities of issuers located outside of the United States.

Specialty:
Funds that invest primarily in equity securities of issuers within a narrow industrial category (automotive, travel, electronics, etc.).

back to page topics