Stocks Add Some Spice to Plain-Vanilla 401(k) Plans U.S. News & World Report (08/21/00) Vol. 129, No. 7 p.64; Lim, Paul J.
Southwest Airlines Pilot's Association has started to
allow its members to invest some of its 401(k) monies in stocks.
In addition to current investments in mutual funds, some pilots
are investing as much as half of their retirement funds in the
stock market. From large well-known companies like Lucent
Technologies, to small, lesser-known risky companies, the
flexibility to invest in individual stocks is welcome news to
Southwest's employees. Southwest Airlines pilots are just a few
of the employees now able to invest in this manner. Benefits
consultants agree that this new trend in retirement investing is
currently on the rise. However, just because an employee may be
given the freedom to "play" with their retirement funds does not
mean they should. Many financial planners worry about the fact
that this new freedom may prompt employees to overload their
portfolio with stocks--paying little attention to risk.
Additionally, commissions, costs, and the difficulty of buying
and selling small amounts of stock may make it more reasonable
for an employee to stick with mutual funds. Nine out of 10 Wall
Street players recommend that a person let their money build up
in mutual funds before investing in stocks. Employees are urged
to keep the majority of their retirement money in diversified
funds--allocating a small portion to stocks.