Blonch

Company Stock

My employer sponsors a 401k plan with investment options in company stock or selected mutual funds. There are good reasons to not put all of your retirement investments in company stock, but the mutual funds offered in the traditional plan may not cover all the investment vehicles you want to use. Please be aware that this traditional “Prototype” fund may not be your only choice.

For example, Fidelity’s “Non-Prototype” BrokerageLink™ program allows investments in stocks, bonds, exchange traded funds (ETFs), and more, depending on your experience and expertise. Although their forms are available online, they have to be printed and mailed to Fidelity to request this program. Anyone in our company’s 401k program is eligible for a BrokerageLink account within their 401k.

Once you establish a BrokerageLink account within your 401k, you can move funds between the traditional company 401k plan and the BrokerageLink account. You don’t have to place orders while the market is open during the workday. You can place orders any time, just like the traditional 401k account. Orders placed when the market is closed are acted on the next time the market is open.

There are nuances to be aware of in making trades in your 401k account. For example

• Except for the Government Money Market fund, Fidelity has trading restrictions on mutual funds to penalize or prevent sale of funds you bought in the last six months.
• You cannot trade company stock in the BrokerageLink account – that is all handled in the traditional 401k side, where you can buy and sell company stock with a very low commission rate.
• You may buy and sell company stock from that Government MM fund in your traditional 401k using online exchange orders, just be sure you are in compliance with “insider trading” restrictions.
• BrokerageLink accounts automatically puts idle funds into a money market account.
• Don’t treat it like a margin account, because it isn’t one – it is strictly on a cash basis. You need to wait for funds to clear from transfers or sales before re-investing them or face limitations on how soon you can sell.

If you want more investment choices with your 401k funds, consider a BrokerageLink account from Fidelity, or an equivalent from your fund manager.

Filed under:
Investments by PecosJack