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I recently spent a contemplative weekend at the bottom of Concord's Nautilus Aquatics' 12-foot pool struggling to qualify for my scuba diver's certificate.

The exercise in which the instructor deliberately turns off the air reminded me of running a small business. Business on a small scale offers decisionmaking with an immediate cause-and-effect relationship.

There is little opportunity to flop around in a sea of cash provided by lenders and investors while you make critical mistakes, pass the buck and slowly ride the burn rate to oblivion. It's more like Hemingway's "Death in the Afternoon."

At my company, Pension Dynamics Corp., we have spent the early part of the summer working on a novel project. We thought we might determine how good we are at running retirement plans compared to the other guys.

For us, as a microcosm of the financial services industry, we are large enough to represent a meaningful statistic while not so large that our project would be overwhelmed by, say, 30,000 company 401(k) plans.

We have generally maintained that keeping investment costs low, choosing funds with superior performance from a universe that includes all funds, and educating employees effectively would lead to superior results in the aggregate.

With about 8,000 participants, more than 200 client companies and about 400 different mutual funds in all of the accounts combined, we built a spreadsheet that showed us where all the money was invested.

Each client company typically offers about 15 investment choices, but money through the years has gravitated toward popular fund families after annual reviews of performance.

Roughly half of all plan money is in the Vanguard family of funds, and about a quarter is in a combination of Dodge and Cox, T.Rowe Price, and the American funds. The rest is sprinkled out across a variety of mostly pure no-load funds.

We eliminated all bond and money market funds, initially, because we were interested in determining how equity money, in general, had been performing.

Assuming that the entire universe of money and funds represented one investor, what would the average yearly rate of return have been over the past three and five years?

It was 16.6 percent for three years and 13.2 percent for five years. The three- and five-year time periods ended as of May 31.

The five-year period included the last year of down market. The total stock market index returns were 14 percent and 11 percent, respectively. Few investment programs achieve market averages -- much less beat them.

A "weighted average" of a group of investments is the rate of return times the amount of money in each investment. We add up all the earnings and divide by the total amount of money in the plans.

Having a proportionately large amount lot of money in an investment that does well increases the average, and vice versa. To weight the returns based on where the money is invested is the only correct way to gain an appreciation for how well a group of investors has performed.

If we compare this weighted average against the same calculation for a typical plan offered throughout the 401(k) industry, it beats the average based on our preliminary comparisons.

Why? Because most 401(k) plans have investments chosen for several wrong reasons.

First, a typical plan has high sales and marketing costs built in and paid by participants in largely hidden fees. There goes 1 percent of annual earnings.

Next, financial institutions operate 401(k) plans as tools to sell their own, often expensive, proprietary funds. This objective excludes the rest of the universe of great fund families that may have demonstrated superior performance in many categories.

(Even Schwab's vaunted "no-transaction-fee" fund marketplace includes only those funds that charge enough in annual expense ratios to pay what Schwab charges to be in the NTF category. So much for the "no-fee" claim.)

Finally, inadequate investment education prompts people to chase the previous year's best performing fund, and they fail to rebalance -- a recipe for poor performance.

We think our composite result is a standard of comparison. It represents where money has actually been invested. It does not reflect a practice plaguing the industry today whereby 401(k) sales efforts show how a selection of funds chosen after the fact would have outperformed an incumbent group.

If you have a plan that you think has done better, send the information to us and we'll run it through our weighted average test. We need the investment results through June for three years and five years and the amount of money in each investment.

We would appreciate the opportunity to expand our research. Remember, each additional single percentage point of annual gain increases retirement assets by 20 percent in 30 years.

This is a comparison we should all be making.

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