Misperceptions

By Al Horn

"It's a common misconception," a friend recently told me. We were discussing our company's employee savings plan.

"Well, shouldn't there be ethical issues here?" I asked.

"Why," he asked in return. "Money is money. Until you have it in you hands, profit is only on paper. Same could be said for losses."

"You don't think it's strange when you move money from an account that's going down in value, to one going up, it always takes a few days for the transaction to be completed? Allowing the account to lose more money before buying into the new account at a higher cost."

My associate was quick to interrupt, "When you have a company that is making thousands of transactions for thousands of customers every day, there is going to be some delay."

At this time I should point out to the reader that my colleague and I work for a company that contributes matching funds to a voluntary retirement account on our behalf. A financial institute that provides different options for how your money is invested administers this account. Like most companies that provide this opportunity for their workers, using an outside firm leaves them relatively blameless in case of disputes.

Here lately, I have heard many other coworkers expressing 'concerns' over transaction practices of our plan administrator. "That would be understandable if the reverse were true," I said. "Then I elect to move something on the way up, into a fund that appears to have bottomed out, it will usually transact the same day. Especially if the fund I am leaving continues to go up over the next few days. I suppose that was just a coincidence?"

"Naturally," he replied.

"Wait a second. You're telling me that you have never been burned by any of these transactions yourself? You have nothing bad to say about these people?"

"Not one word."

"Oh, I see. If you don't have anything nice to say, don't say anything, right?"

"That's not the case at all. My initial election was put into a low interest account that is still ahead of where it started. Factor in the companies contributions and I am doing quite nicely, thank you."

This admission had thrown me for a loop. "With seven different funds and the company stock involved, you have never tried to speculate against the market ups and downs?"

"No," he replied. He smiled and leaned a little closer. "Answer me a question if you would. Is the value of you portfolio higher than it was this time last year?"

"It's almost exactly the same as last year. Maybe even a few dollars higher," I said, with a hint of pride in my voice.

"Does that take into account all the contributions you and the company made during that time period?"

He had me there. "Well, the economy was down. Had I been a little more careful I could have hedged my bets better."

"Are you telling me you could have predicted things any better than the pros on Wall Street?"

"Well, of course not, I don't do it for a living."

"Hence," he replied, "the common misperception."