My employer is changing our 401(k) plan to include mostly collective investment trusts rather than mutual funds. Are they okay, or should we stick with funds? —Jeff Stanford, Fort Wayne

Collective investment trusts, or CITs, are an acceptable alternative to mutual funds—as long as you're careful. Investment funds that banks run for retirement plans, CITs have become popular thanks to annual expenses that, according to Morningstar, run an average of one-quarter of a percentage point lower than those of mutual funds; CITs have lower marketing costs than mutual funds do, and have a lighter regulatory burden.

The trusts, which come in both actively managed and indexed varieties, averaged a total return of 5.5% annually over the 10 years ended June 30, compared with 4.9% for all mutual funds. (Morningstar does not have data for all trusts, so those CIT ­results are less reliable.)

The problem with CITs has been their lighter regulation, says Mercer Bullard, a securities law professor at the University of Mississippi. Several of them are now fighting law­suits alleging they charged too-high fees or lost millions to improper investments. New laws and regulations are boosting investor protections, and you can expect large employers to keep a careful watch on them. But if you don't think your employer has the resources for oversight, stick to mutual funds.

-- Kim Clark

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