Dear Mr. Berko:

I work for a corporation that has more than 400 employees like me, who for the past four years have been enrolled in a new 401(k) plan. We have nine mutual funds to choose from, and the company contributes 10 cents for every dollar (up to $1,000) we personally contribute.

The problem is that none of us knows enough about the mutual funds to select those that are the best. We’re mostly middle-class working Americans who know very little about stocks and bonds except that the stock market is getting over its worst crash in decades.

In 1999, I selected five different mutual funds, and when I got my last statement, my account was worth less than all the money I invested. It’s all even more confusing because the statements we get from the company are very difficult to understand. I’ve sent you my last statement that lists the mutual funds I selected with a friend’s help.

Should I stop investing in this 401(k)? Many of the people who work here know that I’m writing you and they are also anxious to know what to do.

H.T., Syracuse, N.Y.

Dear H.T.:

I’m disappointed that your company has made such a poor selection of mutual funds available to its employees. I recommend that your company consider changing fund families and that a workers’ committee be appointed to discuss this with management.

If you folks make a cogent presentation with the proper comparisons, management will be grateful for the work you’ve done and everyone will benefit.

Now, choosing mutual funds for your individual 401(k) doesn’t mean selecting those funds with the best one-, three-, five- or 10-year records. The funds you select for your 401(k) must be in congruence with your earned income, your spouse’s earned income, your family’s unearned income, your spouse’s qualified plan(s), a description and value of assets that constitute your net worth, a summary of your debts, your risk tolerances, ages of you and your spouse, retirement income requirements, approximate Social Security and pension incomes you and your spouse expect to receive, and the ages at which you expect to retire.  I’ve sent you an investor profile, which is a questionnaire some investment professionals use to assist them in making investment decisions for their clients. If you would take some serious time to complete the three pages (I mean serious and reflective time) and return it to me, I’ll help you make selections from that list of nine mutual funds.

I don’t respect this fund family, as I do many others, but there are changes we can make that may modestly improve your performance and limit your downside risk. Sadly, this fund family doesn’t give us much to work with, and unless it changes portfolio managers, it may continue to have a soupy performance.

Certainly most of the folks with whom you work have reviewed that list of funds. All those small numbers, squiggly lines, confusing footnotes, cute italics, baffling caveats, bewildering percentages and funky words in the fund literature read like diddly squat.

Many of your co-workers, like you, probably made the same mistake of asking a friend (who might be a smidgen more knowledgeable) for investment advice. Well, if that friend isn’t extremely knowledgeable, you might just as well use the dartboard method to pick the funds.

I’m disappointed that your company has chosen a fund family with a poor long-term performance record. I’m also disappointed that your company has not employed a caring professional to assist its employees in making the proper selections for their 401(k) accounts.

It’s important to know, when making investment decisions, that today’s selection of funds may not be suitable for the rest of your 401(k) life. At various periods in your working careers, the funds in your 401(k) should change to reflect the changes in your age and stage.

When we hang up our hammers at age 60 or 65, most of us should have less money in growth, small-cap, global, technology, telecommunications and aggressive funds. We may be better served with more of those dollars in a growth and income fund, a convertible bond fund, a balanced fund, a balanced index fund, a corporate bond fund, an utility fund, a government bond fund, etc.  Considering your current dilemma, my third recommendation is to establish a Roth individual retirement account with another fund family. Tell them that you want automatic monthly deductions of $250 from your checking account.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.