BP: So what do you mean by 401(k) day trading? Can you really trade investments within your retirement plans on such a frequent basis without penalty?

RS: 401(k) day trading is really buying low and selling high in your 401(k) portfolio. You are making daily fund exchanges between cash and stock. As you know, 401(k) plans offer mutual funds as fund options, which are usually valued once a day at the close of the market. I'm saying take a few minutes a day and fund exchange, stock to cash, cash to stock, based on what the market is doing that day.

If the market is about to end up, it is time to sell your stocks for cash. If it is about to close down, buy stocks. Transfer from cash to stock. Each day, when you do this incrementally, you will achieve lasting gains that accumulate over time. Over the past three years, measured through Sept. 30, you could have returned 16 percent better than the market.

If you look at the statistics, 13 percent of 401(k) holders make an exchange in a given year. That's one out of 10, so a lot of people aren't paying attention to their 401(k) accounts. What this is getting them to do is take a look at it. They need to manage their retirement savings. This approach will allow you, if you take an active interest, it will allow you to get better returns than the market is getting.

BP: Does your system work in a volatile market?

RS: The method works in a volatile market. That's what I've seen in the past 10 years. …We're close to where we were in 2000 compared to the S&P 500. There have been two major rises and downdrafts. This system does particularly good in a volatile market that goes up and down. I believe we have conditions now that are going to continue that until 2020. I say that because of the demographics. The baby boomers have reached and surpassed their peak spending years. The millennial generation, born in 1977 or later, haven't reached their peak spending years. Stock prices are going to continue steady about where they are until 2020. That type of market, volatility and having a market that doesn't go up much or down much over time, you can do well by doing 401(k) day trading.

BP: How much money do you start with and how does that work?

RS: What I'm suggesting is each day, look at a market index like the S&P 500. If it is going to end up or down, calculate your trade amount on the change in the index. It's up to you. But one way would be to transfer a fixed dollar amount, such as $100, for each one-point change in the S&P 500 index for the day. So, for example, on a day where the S&P 500 index goes up 5 points, you would transfer $500 from stocks to cash in your retirement savings portfolio.

BP: Is it really day trading?

RS: It's not day trading per se. You are taking a few minutes a day at market close and making one fund exchange, so you are paying attention to your 401(k) and making exchanges will benefit you over the long haul. It is more like daily trading or every day trading.

BP: What types of retirement funds do you have to be invested in for this to work?

RS: Basically you are looking at two funds. You are looking at a cash fund and a market index fund, like an S&P 500 fund, in your 401(k). You can use it for 457 accounts, 403(b) accounts, which teachers have, and IRAs, as long as you have a cash and market index fund, you can use this approach.

BP: What are the benefits of day trading within your retirement account?

RS: The beauty of doing this in a 401(k) plan is, 1. No taxes on gains. You pay tax at the end of the day when you get your distribution. 2. You don't pay for direct trading costs; instead trading costs are shared among fund holders. If you did the same trades in a normal brokerage account, you get taxed immediately on your gains and pay for your trading costs.  

BP: Why did you leave consulting for academia?

RS: I like interacting with people and just getting the flow of ideas back and forth. I appreciate that more. Schmitt teaches business courses to individuals who want to become certified financial planners.

He recommends keeping a stash of investments within your 401(k) that would be enough to support you for five years. Those funds would not be day traded. That money could be placed in a bond fund or a blended fund, whatever the investor is comfortable with.

"I'm trying to take the emotion out of it. This is a formulaic approach," he said. People get into trouble with their retirement savings when they let their emotions rule their decisions and they try to time the market.