Important Notice on Excessive Trading Restrictions
Your retirement plan has the long-term objective to help you acquire the financial resources necessary to sustain your preferred lifestyle when you retire. While that goal can be described and pursued in many different ways, typically the fundamental strategy emphasizes consistent, long-term saving.
The majority of investors save for retirement by investing in mutual funds in a manner consistent with long-term investment objectives. However, while they are definitely in the minority, other investors may engage in frequent or excessive trading - buying mutual fund shares, and then selling them quickly, even as soon as the next day - in an attempt to capitalize on short-term movements or pricing disparities in the market
Short term and other frequent trading can adversely affect a fund's performance by reducing returns to long term shareholders by increasing fund costs (such as brokerage commissions), disrupting portfolio management strategies and harming performance by diluting the value of fund shares.
Efforts to combat market timing have increased among mutual fund companies. To help protect the interests of fund investors seeking long-term returns on their investments, many mutual fund companies monitor excessive trading and limit the number of times investors move in and out of your funds
Such monitoring is based upon the concept of a "roundtrip" within a fund. In retirement savings plans, a roundtrip transaction occurs when a participant exchanges in and then out of a fund option within a specified number of days.
For the purposes of excessive trading policy, purchases and sales generally do not include systematic contributions or withdrawals (i.e., regular contributions, loan payments, hardship withdrawals) as permitted by the plan.
Under the excessive trading policies, investors are limited to a specified number of roundtrip transactions per fund within a holding period. The number of roundtrips and the holding period vary by mutual fund companies but the most prevalent policy is to limit participants to one roundtrip in a 30 day period.
To date, two mutual funds – Columbia Funds and the American Funds have issued excessive trading policies. The details of such policy are described on the attached sheet. If the fund options in your retirement plan include any Fidelity or American Funds, the excessive trading policy will apply to your participants.
If a participant initiates a trade in one of these funds, a warning message will be displayed explaining the restriction on future trades involving these fund. If the participant completes the trades and initiates another trade prior to the expiration of the holding period, the participant will be blocked from making the trade.
AMERICAN FUND EXCESS TRADING POLICY
Any American Funds shareholder redeeming shares having a value of $5,000 or more from an American Fund will be precluded from investing in that fund until 30 caldendar days have elapsed since the date of the redemption transaction.
COLUMBIA FUNDS EXCESS TRADING POLICY
Any Columbia Funds shareholder redeeming shares we be precluded from investing in that fund until 28 calendar days have elapsed since the date of the redemption transaction.