A study conducted by the Wharton School said increased plan communications also leads to increased trading. The study, which covered 60,000 participants over a three-year period, found that :
- Average portfolio turnover – the amount of total portfolio value traded – increased by more than 50% after the Internet was introduced
- Trading frequency nearly doubled.
Results of the study impact both the individual and the corporate sponsor, the study found.
While 401(k) trades do not incur fees or taxes when trading, the plan will assume some of those costs in everything relating from lost time to communications expenses.
Plan sponsors, meanwhile, can counter some of the ill effects of day trading by introducing more education and stressing that 401(k) plans are long-term and are not suited for frequent assets shifts, the study’s authors suggested.
The study was done in conjunction with Harvard University and Hewitt Associates.