Getting Personal
Should I stick with mutual funds?
Question: In 2006 I decided that I would move my (significant) individual mutual fund holdings to a managed account with my investment firm (a major mutual fund company). I did this because I have been busy in the military and have not had time to manage my mutuals and keep track of recent goings on. I am young, so they determined I should take risk. I agreed. Now that whole amount is down 35% from when I put it in. I am 38 years old. What should I do? Chris, Ft. Worth (deployed to Baghdad), TX
Answer: It hurts when our savings decline by that much. You do have a lot of company, however. And your portfolio is probably reasonably well diversified with a tilt toward equities (because of your age). The reason I say that is you would be down a lot more without some bonds holding down your paper losses. (Conservative bond mutual funds with a big dose of government securities did well last year.)
Normally, I am a skeptic about managed funds, but in your case it was a smart move considering all the demands on your time in the military. I would ask myself the same question everyone should address during this market meltdown. Is my portfolio too risky for me? Here's a safe forecast: There will be other bear markets -- probably several -- during your lifetime. Are you okay with that? You're still very young, and you have a long time for the money to compound. That argues for leaving it alone. But if you don't like the losses, I would direct the managed account to create a more conservative portfolio over time. There's no rush, but you'll want to reduce your exposure to equities.
02/20/09 by Chris FarrellSearch
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Comments (2)
February 20, 2009 9:06 PM PT
thank you for good information.......
:)
February 24, 2009 5:23 AM PT
Mr. Farrell,
I listen to you often on the radio. I am very impressed with the compassion and concern in your commentaries. But sometimes I want to throw a shoe at the radio when I hear you give very conservative investment advice. These are not normal times. The worlds financial system is in the process of collapse, as Volcker, Greenspan, Soros, and others now realize.
The only reason those government securities did well last year is because the rest of the world dumped their rapidly depreciating dollar denominated hard assets and ran to safety to U.S. treasuries. How can you recommend staying in these treasuries when there's open discussion of a treasuries bubble, and we are projecting deficits in the trillions for the next few years?
We are heading for a currency crises and anyone who doesn't have 30-40% in precious metals is about to see another 50% or more loss in their savings.
We are in a new, and very unpleasant era, and you might want to throw out your approach, which was fine in the past, and start looking at the very different world we face in the future.