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From Yahoo Finance: SW Pilots 401k movements...

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Ky.BrownBourbn

Well-known member
Joined
Nov 29, 2005
Posts
553
Vanguard may curb 401(k) trading by Southwest pilots
Reuters ? 12 minutes ago

(Corrects fourth paragraph to say Vanguard imposes frequent trading fees on some of its funds, not all of its funds, as implied in the paragraph being corrected)
* Says mass trades based on newsletter recommendations disrupt fund managers
* Pilot subscribers can move up to $40 million per fund in a week - plan sponsor
* Threat follows T. Rowe Price's trading ban on some American Airlines pilots
NEW YORK, Oct 10 (Reuters) - Vanguard Group is throwing its considerable heft into a battle between fund companies and investment newsletters.
The mutual fund company is threatening to prevent Southwest Airlines pilots who subscribe to a monthly newsletter called 401k Maximizer from purchasing the three Vanguard funds in their union's retirement plan, according to officials at Vanguard, the pilots union and the newsletter.
Fewer than 1,000 of the approximately 8,000 pilots in the Southwest Airlines Pilots' Association $2.6 billion 401(k) retirement plan subscribe to Maximizer, but they can generate $30 million to $45 million of trades in each fund in the week after the newsletter changes its investment model, said John Nordin, a pilot who chairs the union's 401(k) committee.
Vanguard typically asks investors to give it at least a day's notice before making large trades and also imposes fees on frequent traders in some funds. Maximizer officials say that, as a newsletter, they do not execute trades or know how many of the approximately 1,000 subscribers at Southwest follow its advice.
Vanguard spokeswoman Linda Wolohan confirmed that the company told Maximizer late last month to stop including its funds in its recommendations, and said it expects to soon contact individual pilots who subscribe to the newsletter.
Scott Gibson, a Southwest pilot who is chief executive of Retirement Maximizer, declined to comment on his plans. His firm charges $85 a year for its Southwest newsletter. It avoided the issues in its most recent newsletter, which recommended no fund changes in the SWAPA plan.
The 401(k) contains 17 other investment choices besides Vanguard's S&P 500 Index, Small-Cap Growth Index and Inflation-Protected Securities Index funds.
"Large, unexpected transactions can be disruptive ... because they can affect the fund manager's ability to fully invest cash or to liquidate securities in a timely manner," Wolohan wrote in an e-mail.
"If future recommendations by 401k Maximizer Regarding Vanguard conventional (mutual fund) shares result in large trades by SWAPA, we will reject additional purchases from participants for a to-be-determined period of time," Wolohan wrote.
Vanguard's letter suggested that Maximizer recommend exchange-traded funds that are not disruptive to portfolio managers because they are priced throughout the day. Retirement plan fund orders are bundled for execution at a single price after the market closes.
Vanguard's threatened restrictions follow a permanent trading ban T. Rowe Price Group imposed in August on some American Airlines pilots it said were actively trading its four funds in their 401(k) plan based on signals from EZTracker, another monthly newsletter for airline employees.
 
The man trying to keep us down I tell ya!!

The other side of the flipped coin, the fund managers can move whatever amount of money they want whenever they want.
 
Time to just move to the ETF plans and let the fund managers play with whatever they have left to trade. See ya!
 
So corporations no longer provide a tradition pension--they offer an employee managed 401(k). Now the mutual fund companies want to penalize employees for actually managing their 401(k)? What do the fund companies want, for us to mindlessly "set it and forget it" while they sit back and collect fees?
 
What do the fund companies want, for us to mindlessly "set it and forget it" while they sit back and collect fees?

Doing that with a quarterly rebalance has paid off quite handsomely in my wife and my IRAs and 401Ks.
 
Doing that with a quarterly rebalance has paid off quite handsomely in my wife and my IRAs and 401Ks.

The newsletters come out monthly and the Fund Managers are pissed because when the pilots make a move (via the newsletter) we are talking about very large sums of cash they have to distribute.

To the other question, the newsletters have done fairly well. Better than throwing darts. They went to cash mid-08, so they like to tout their prowess regarding that. Performed close to average since then.
 
Their returns are not superior to other ways of investing but like Red stated above, they saved a lot of people a ton of cash when the bottom fell out.
 
Frequent trading of mutual fund shares drives up costs and penalizes the participants who use mutual funds in the more traditional manner.

The ETF is the correct tool for this, and fund management companies can and should have policies in place to prevent a small number of people from misusing the financial instrument.
 

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