401(k) retirement plans typically allow employees to submit a trade order which will be executed at the end of the day at the closing price of the particular fund. If order is entered afternoon during the trading day, then some plans may postpone the execution of the order to the next day, when it will be executed at the next day's closing price.

This makes it much harder to trade 401k funds compared to stocks in a broker account where you can trade real time during the day. Regardless, some of us like the thril or the hope of controlling their destinity via frequent trades with hopes of beating the market. However, it is often said that these frequent traders actually underperform. This also increases the expenses for the underying funds and adversely effects others who are invested in these funds.

Short term and other frequent trading by shareholders can adversely affect a fund’s performance by disrupting the portfolio manager’s investment strategy, increasing expenses (such as trading commissions), or allowing some investors to capitalize on stale pricing at the fund’s expense. To help protect the interests of fund investors in collectively seeking long-term returns on their investments, 401k account custodian monitors excessive trading and limits the number of times investors can move in and out of the funds offered in the IBM 401(k) Plus Plan.

Monitoring is typically based upon the concept of a “roundtrip” within a fund. For example, in a given plan, a roundtrip transaction occurs when a participant exchanges in and then out of a fund option within 30 days (Or N number of dates defined by custodian).

When monitored, typically all fund offerings in a 401(k) plan are subject to the excessive trading policy, with the exception of the cash based interest only aonly account, or similar. For the purposes of the excessive trading policy, exchanges do not include systematic contributions or withdrawals (i.e., regular contributions, loan payments, hardship withdrawals) as permitted by the plan, they only include participant-initiated exchanges greater than some pre-defined dollar amount. Under the excessive trading policy, participants are limited to one roundtrip transaction per fund within any rolling X-day period. This could be 30 days, 90 days, 120 days. It can be subject to an overall limit of Y roundtrip transactions across all funds over a rolling 12-month period. For example 5 roundtrip trades per year.

The first roundtrip in any fund results in a warning letter. Participants with two or more roundtrip transactions in a single fund within a rolling X-day period will be blocked from making additional exchanges to that fund for M days. It could be as long as 90 days or 6 months. Trading suspensions do not restrict a participant's ability to make investment exchanges out of a fund. In other words, the right to redeem is not affected by these policies, but the ability to make subsequent exchanges into the fund will be. Any four roundtrips in one or more funds in that plan account in a 12 month rolling period will result in the participant being limited to one exchange day per calendar quarter for 12 months. Once the 12 month exchange limitation expires, any additional roundtrip in any fund in the next 12 month period will result in another 12 month limitation of one exchange day per quarter. You might then as well forget about your 401(k) account.

Under these conditions, if you are a frequent trader, and if your trading brings good results in your brokerage accounts, it may be better for you to rollover your 401(k) account into an IRA account so that you can trade more frequently using a broker. You may find tools to improve your stock market trading stragies at TradingStocks.net.