By Richard Schmitt
SAN FRANCISCO ( TheStreet) -- It seems like only yesterday that my baby retirement savings portfolio came to life. Yet here I am, four years later, looking back fondly at that day in May 2008 when 401(k) day trading started transforming my tiny bundle of joy into a wonderful monster.
I'll admit that when 401(k) day trading came into my life, I was hesitant about entrusting my wee one to a complete stranger. This newcomer had no track record backing its premise of methodically bringing out my precious baby's untapped potential in uncertain times.
With no experience to review, I tried 401(k) day trading and observed closely its effect on the beloved source of my constant worry and affection. I quickly found that 401(k) day trading simply called for some give-and-take through daily transfers from one pocket of my retirement savings to another. Then I followed the book to ensure that my daily fund transfers abided by the retirement savings funds' frequent-trading rules.
With each passing day, I was using the old adage of "buy low and sell high" to build a better future through incremental daily trades into and out of a stock (such as S&P 500) index fund that would set up or reap lasting gains. If stocks were headed down one day, I would buy some stock. If up, I would sell some stock. The amount of each retirement savings account fund exchange needed to buy into or sell out of the S&P 500 index fund just before the market close was simply determined as a fixed calibration factor of my choice multiplied by the daily point change in the S&P 500 index. Even better, the lasting gains resulting from these daily fund exchanges performed within retirement savings accounts were unfettered by immediate taxes and direct trading costs.At first I worried that tweaking my little bundle of retirement savings joy every day through once-a-day fund exchanges might be upsetting for the tyke. After all, 401(k) day trading's dismissal of holding for the long term seemed a bit removed from what I heard other caretakers advise. But then I noticed that their set-it-and-forget-it approach had done nothing to improve their clients' fortunes since the turn of the millennium. Next, I feared that raising my pride and joy with the help of 401(k) day trading might require too much attention from my already overtaxed schedule. These days a busy life makes it hard to have the time, inclination or energy to nurture a small fry to maturity. No worries, though, as I found a routine for 401(k) day trading that took merely minutes a day to make something out of a market that has offered nothing more than volatility in these trying times. Only testing over an extended incubation period could determine whether 401(k) day trading actually racks up the type of performance that would justify its long-term use as a better way to manage retirement savings. Perform it did, as 401(k) day trading generated lasting growth under some pretty extreme market conditions. Starting with a $150,000 retirement savings portfolio evenly split between cash and S&P 500 funds, 401(k) day trading with a calibration factor of $100 for each one-point change in the S&P 500 index to determine daily fund exchange amounts resulted in a return of 15.2% -- excluding dividends -- over the four years ending April 30. Even with trouble lurking at nearly every turn over the past four years, 401(k) day trading took my precious cargo to the next level. It just so happened that these extremely volatile market conditions only contributed to the good fortune 401(k) day trading brought my way. Whereas holding steady in stock would have returned less than 1%, 401(k) day trading would grow that nascent treasure by 15% during the four years (again, excluding dividends). If that keeps up, soon I will be able to count on my baby to take care of me in my retirement. After all, isn't that what this is all about?