-=PCTechTalk=- Re: offtopic,mutual fund questions

  • From: "cristy" <poppy0206@xxxxxxxxxxxxx>
  • To: <pctechtalk@xxxxxxxxxxxxx>
  • Date: Sun, 1 Feb 2009 17:46:27 -0500

HI Gman,

I must admit I am a bit uneducated in all of this but have put faith in my 
financial advisor.  Under normal circumstances, I would know I will be 
working for at least ten more years so would make sense to leave it in. 
But, there is a possibility I could become disabled before then possibly to 
the point of not being able to work, so this part is a little risky for me.

I also am somewhat confused about this portfolio guide service they offered 
that I went ahead and signed up for again on my advisor's advise.  I pay 
about $50.00 bucks a year and the powers to be decide best where to put my 
money.  It also gives you projections or something too.  I had noticed my 
money in the +gain side before I went to this service, coincidence, I don't 
know.  But for the past year and one half have seen all -loss signs in my 
total amount of my funds.  I did do one withdrawal a few years back but was 
for a good reason and this was agreed that it was with my advisor.  To buy 
back service credit at a very good rate at the time.

I have steadily increased my monthly amounts going in also.  I am wondering 
how did they determine where to put the money before the guided portfolio 
service and was it doing better then since I was seeing more gains than 
losses.

christy


----- Original Message ----- 
From: "Gman" <gman.pctt@xxxxxxxxx>
To: <pctechtalk@xxxxxxxxxxxxx>
Sent: Saturday, January 31, 2009 5:33 PM
Subject: -=PCTechTalk=- Re: offtopic,mutual fund questions


It's off-topic, but this affects just about everyone and it's probably on
most folks minds more than they care to admit.  So let's get to it.  Note
that the following ONLY applies to investments based in mutual funds.  Any
other type of investment would need to be valuated separately.


I'm about 20 years removed from a stunted career in financial services
(Reaganomics put many of us out of business back then), but the advice I
always gave holds true just as much today as it did back then.

When you buy into ANY form of mutual funds (including a 403b), you're buying
'shares' of that fund at whatever price the fund's collective investments
are worth at the time of purchase.  A fund is a collection of stocks, bonds,
futures, etc. that collectively determine the value of the individual
shares.  A decently managed fund will also have a certain amount of their
'investments' kept aside as uninvested 'cash' to allow them to move in
quickly on good opportunities (or as a hedge against loss during troubled
times like these).  The most important thing you need to understand is that
no matter what happens to the price of the underlying investments, you don't
own any of them.  As companies begin showing heavy losses, the fund will
shift those investments to other companies that are doing better.  If the
overall economy turns for the worse, they will aim to focus on businesses
and investments that are most likely to better weather the harsher financial
climate.  If a company goes out of business, they are in a much better
position than the rest of us to know ahead of time and pull their
investments out before the inevitable quick plunge to 'worthless', even
though such a loss would only represent a small percentage of the overall
'fund'.

However, no matter how all of that shakes out on their end, you STILL have
that same number of shares (more if you're reinvesting any dividends you
receive &/or are still actively contributing to the fund) and are, in a way,
isolated from the stocks/bonds ups & downs that the fund managers have to
deal with daily.  Even if your fund happens to 'go under', it will be
absorbed by another fund and you'll STILL have your shares.  The "Sell
Value" of them will just be determined by the efforts of a different set of
fund managers that was obviously stronger than the one that closed its
doors.

I just saw that Don tossed in the old equation to Buy Low, Sell High
(provided you're not needing to pull out your money soon).  He's absolutely
right and, in my previously professional opinion, now would be the absolute
worst time to sell ANY mutual fund shares.  For one thing, you'll get very
little for them compared to what they used to be worth.  But the worst part
is that you'll lose out on the rebound profits when the economy eventually
turns around (and of course it will - it's just unknown how long it will
take to turn it around).  Remember that as long as you own shares in a
mutual fund, you're safe from individual company closings and you don't need
to even think about following the market until you're within several years
of retirement.  Even then, you don't have to start making withdrawls from
retirement plan-type packages (401k, 403b, etc.) until the age of 70 or so
(that may have changed since I last looked it up), so if you don't need the
money the moment you retire, you can still leave it in there to soak up even
more of the economic recovery rebound.

All told, the only folks who should turn out to be negatively affected by
this economic downturn are those who are very close to retirement (or
mandatory withdrawl) age, didn't pull out before the severe drop in share
prices and will actually need to use that fund money to live on.  You can
add to that group anyone else who panics and sells their shares now.

So, unless you're very close to absolutely HAVING to pull out your money in
order to survive, hang in there and stop reading the financial section of
your local paper.  You'll thank me later when your share prices go back up.

Peace,
Gman

"The only dumb questions are the ones we fail to ask"

----- Original Message ----- 
From: "cristy" <poppy0206@xxxxxxxxxxxxx>
To: <pctechtalk@xxxxxxxxxxxxx>
Sent: Thursday, January 29, 2009 7:51 PM
Subject: -=PCTechTalk=- offtopic,mutual fund questions


>I know this is offtopic but are there any 403b mutual fund experts on the
> list;0, I have some questions ;0
>
> thanks,'
> christy

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