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Author: BadlandZ Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76421  
Subject: PayChex Screwing my 401k? Date: 1/20/2001 10:17 PM
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Excuse me for this being long, you can skip most of the bottom part, because I'm sure you all read a version of it before.

I just wanted to see if there was anyone else out there that has PayChex managing thier companies payroll and 401k. If so, PLEASE send them a letter like this!

Also, I welcome any comments on the validity of my claims, am I right here?



Here's what I just sent to a few friends at work.
Hey XXXXX(Coworker),

I sent the letter below to PayChex, because I think our 401k plans SUCK. I sorta think maybe we all should.

Compare for yourself, http://www.bigcharts.com

We can choose:
CAGBX
SCHBX <-I picked
SGRBX
SCBBX
SBCBX
SCIAX

Compare ANY of those shit funds to the S&P 500, or a GOOD S&P 500 Index Fund like Vanguard 500 Index Fund (VFINX).

VFINX has a management Expense Ratio of 0.18%, the _____ng funds we can choose seem to be at LEAST 10x that! And they perform like ____.



To PayChex (via thier web feedback form)
Dear PayChex,

PayChex handles payroll and 401k for my employer. I have reviewed the investment options for our company's 401(k) plan, and I wish to request that a passively managed S&P 500 equity index fund be added to our
plan's choices. The available studies relating to mutual funds reveal that over any one, two, five or ten-year period of time, an S&P 500 index fund will likely outperform the vast majority of actively managed
funds. Ideally, I would like the option to put my money into the S&P 500 tracking passively managed Vanguard 500 Index Fund (VFINX).

While I may not be with our fine employer 50 years from now, I do intend to defer more than $10,000 in our 401(k), so I believe that the inclusion of an S&P 500 index fund in our plan would likely make a very significant difference in the retirement that I can look forward to.

Given the fact that I understand that I'm looking at perhaps $700,000 or more as a consequence of your reaction to this request, please understand that I intend to be persistent. But only if I have to be.

Thank you for your attention to this matter.

Very truly yours,
_______________

PS: For Reference: The improvement in returns that we employees can expect from the selection of an equity index fund as opposed to the average high-fee actively managed equity mutual fund is truly dramatic.

I quote the following excerpt from John Bogle's piece, "The First Index Mutual Fund" available for your review at www.vanguard.com. In it, Mr. Bogle writes, "What difference would an index fund make over 50 years? Well, let's postulate a +10% long-term annual return on stocks… If we assume that mutual funds costs continue at their present level of about 2% a year, an average mutual fund would return 8%. This 2% spread is very close to that of the past 15 years, during which the Vanguard 500 Portfolio provided a 2.2% margin of return over the average equity fund (or, more accurately, the better performers that survived the period[.]…[E]xtending this compounding out in time on a $10,000 initial investment, the market (at 10%) would produce $1,170,000 after 50 years; the mutual fund (at 8%) would produce $470,000. The difference in return between the two -- $700,000 -- is an unbelievable 70 times the initial stake of $10,000.

"Looked at from a different perspective, our hypothetical fund investor has earned $1,170,000, donated $700,000 to the mutual fund industry, and kept the remainder of $470,000. The financial system has consumed 60% of the return, the fund investor has achieved but 40% of his earnings potential. Yet it was the investor who provided 100% of the initial capital; the industry provided none. Confronted by the issue in this way, would an intelligent investor consider this split to represent a fair shake? Merely to ask the question is to answer it: 'No.'"
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