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“Daytrading” the 401k Starting to Catch On…

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

I am sure this will end well.  Obviously the root cause is the massive shift of retirement obligations from the company to the employee over the past few decades.  Combine that with a 12+ year world of no returns, and a lack of savings and you get people in their older age realizing they don’t have enough to retire, and turning to methods such as this. Per the LATimes:

  • Americans worried about running out of money in their golden years are trying a new investment strategy: day trading their retirement funds.  Disillusioned with the conventional buy-and-hold approach, baby boomers are anxious to improve their retirement prospects after two punishing bear markets in the last decade.
  • Some people are trading the mutual funds in their 401(k) plans more frequently. Others are venturing into options. And some aggressive investors have begun day trading their nest eggs — all in a bid to make up for lost time.
  • Americans are a collective $6.6 trillion short of the amount they need to retire comfortably, according to a 2010 analysis by the Center for Retirement Research at Boston College.
  • Schmitt and others circumvent the rules by using multiple accounts — buying in one and selling in another — to mask the frequency of their trading.
  • Trading also has been made easier by the increasing availability of so-called brokerage windows, which are accounts within 401(k) plans that typically allow daily trading in funds and stocks. About 29% of companies offer them, up from 12% a decade ago, according to Aon Hewitt.
  • “There is — I don’t want to use the word ‘desperation’ — but it’s close to that,” Fischer said. “Ten years of a flat stock market bumps up against reality for people in their 50s or 60s who are running out of time to see appreciation” in the stock market.

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog


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