"Step right up folks!

"Pay your penny and take your chances on guessing which of these corporate logos covers the fortune and which covers the booby prize. Guess the right company and you'll be rich beyond your wildest dreams. Guess the wrong company and, well, you'll need to find creative substitutes for money."

That's how we might turn our choice of employer and 401(k) plan into one of those games played at state fairs.

In fact, we take our chances in 401(k) plans. The difference is that more than a penny is involved. Since many companies have capped or terminated their defined benefit pensions 401(k) plans are likely to be a primary source of retirement income for millions of workers.

Suppose you had joined Dell Computer ten years ago and had invested $100 a month in Dell shares, increasing your investment 4 percent each year as your income rose. How much would your investment be worth today?

Answer: you would have invested $14,400. It would have been worth an incredible $336,000 at the end of 2001. Sadly, that would be down from a peak of $664,991 in March 2000. It's not surprising someone invented the phrase "Dellionaire" to describe becoming rich through ownership of Dell shares. The end value blows away the return provided by the most commonly used benchmark of stock performance, the Standard and Poor's 500 Index.

If you had pursued the same investment plan with the Vanguard 500 Index fund, your investment would have grown to "only" $25,487. It would have done better than 78 percent of its competitive peer group of managed equity funds, according to Morningstar data. Like Dell, you would have less today than you had two years ago. Your index fund investment would have peaked at $30,450 in August 2000.

What happened to Enron employees who followed the same path? Their $14,400 investment over ten years would now be worth $999, a bone-breaking fall from its peak of $61,673 in September 2000.

Most 401(k) plan participants were somewhere between those two extremes. The table below shows a rank ordered list of company stock performance for a number of major companies headquartered in Texas. Similar lists for other states would show a wide variation in results. Few would be as gigantic as the variation found in Texas.

  
Ranking Major Company Investment Plans
($14,400 investment made over ten years)
Holding Final Value
Dell Computer

$332,944

Clear Channel Communications

$109,185

Texas Instruments

$55,611

Southwest Airlines*

$42,842

Kinder Morgan

$42,794

Sysco

$42,345

Affiliated Computer Services

$38,507

Dynegy

$35,986

Radio Shack

$32,130

Anadarko Petroleum

$31,439

El Paso

$30,364

ExxonMobil

$28,254

Apache

$27,425

Vanguard 500 Index

$25,488

Electronic Data Systems

$24,870

Kimberly-Clark

$24,728

TXU

$23,690

SBC Communications

$23,197

Waste Management

$22,755

Baker Hughes

$21,627

Reliant Energy

$21,291

Burlington Northern Santa Fe

$19,610

Transocean Sedco Forex

$19,569

Compaq Computer

$18,040

AMR

$16,785

Burlington Resources

$14,379

J.C. Penney

$14,076

Conoco**

$4,763

Enron

$999

Source: Morningstar Principia Pro, December 31, 2001 data
  

How you did on company stock depends on the stock, not your persistence or regularity. Nor does it depend on your industry.
  • Employees at Dell ended with $332,944. The same program ended with $18,040 at Compaq Computer.
  • Employees at Southwest Airlines* ended with $42,842. Those at American Airlines (AMR) ended with $16,785.
  • Employees at energy trader Dynegy ended with $35,986. Employees at Enron ended with $999.
  • Employees at ExxonMobil ended with $28,254. Those at Conoco** ended with $4,763.
  • Employees at Radio Shack ended with $32,130. Those at J.C. Penney ended with $14,763.
* Addendum:   Southwest Airlines employees receive SWA shares, without cost, through the company profit sharing plan. SWA shares are not included, as a choice or as a company match, in the 401(k) plan. Distributing company profits in the form of free stock, one reader wrote, "… allowed me to retire at age 45 after 21 years with the company."

** Correction:   Conoco was spun-off by DuPont in October 1998. As a result, it's accumulation figure represents just more than three years of accumulation, not the ten years represented by the other companies on the list. For that reason, it should not have been included.