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Mutual Funds.flawed concept

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Terrel L. Shields

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The idea of Mutual funds is that averaging of stocks in a fund will reduce volatility - a good thing in the over 55 crowd. Such a concept has taken a real beating lately.

It seems a lot of people are not willing to stay hitched and sell. That means the Mutual funds (devoid of buyers in this market) are forced to sell (redeem) their stocks in order to cover the redemptions....

My mixed portfolio - growth, utility, foriegn and blue chip funds...tanked. I have probably lost close to 50% in what is touted as "safe". I know it is down 25% just for the quarter but this week is a hemmorage. When Hilary Kramer predicted this in July, I asked my broker what he thought about redeeming the Mutuals and going to the sidelines..He argued against it. That is the last time I will take the advice of a broker. They are simply too close to the forest to see the trees.

Now I am stuck with pulling some cash and taking some risks. I will go back to buying stocks. No more mutual funds for me.
 

CGgonnabee

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My 401k and 403b are down 37-42% (ytd) as of yesterday . I guess that I will work until I am 90.

I got two orders today, so I am guessing it is appropriate to celebrate and fix some waffles on Saturday morning.

I already bought the ammo and beans....:)
 

Workbox

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Most stock boys and girls are as clueless as those that depend on them for advice. One guy on the radio, told most folks that if their broker made loose more than 20% should be very angry and was calling out the other radio show host to admit that they screwed up on their predictions.

As a side note, Dave Ramsey is a big Mutual Fund guy and anti-gold. He has been getting some heat lately.
 

TJSum

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I guess it is better than those who actually did buy stocks that are now penny stocks or worthless altogether. One thing that I have learned, they constantly preach spreading the investments out over several types of funds, domestic, international, etc. But it seems all the funds pretty much gain and lose at the same pace, even real estate funds. I think the diversification aspect isn't as great as promoted.

Terrel makes a great point, many fund managers might see great buys out there right now, but with all the redemptions they can not follow up on them and are forced to sell when they wish to buy.
 

Restrain

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My funds are energy funds, still better than what's happening today. Whatever happens, this fund will come back. Got out of MidCaps and Overseas Expanding Markets, moved those to money market funds.

You even have to watch bond funds. Most of those are tanking as well.
 

Karl

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You have NOT lost anything until you actually sell it.
 

Terrel L. Shields

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I think the diversification aspect isn't as great as promoted.
that is the point.

You have NOT lost anything until you actually sell it.
Mark to market...it's gone.

Energy stocks are tanking to as oil goes lower. But some are paying dividends. Exxon was buying their own stock to get rid of the surplus cash...that is money that is merely gone..disappeared. Chesapeake stock price is collapsing and I predict will be forced into bankruptcy, not by low stock price, but by falling gas (natural gas) prices... Much of their production relates to a break even price of $6-7 per MCF. And much of that was bundled into MLP's - multiple limited partnerships - sold to Chinese and European investors. If the price does not rebound under a cold winter, CHK has got to choke...Stronger companies like Devon, XTO, Anadarko, may be buys now...but their shares will not rebound for a while. The hot shale gas players with high debt loads are sweating bullets.
 

Mandi Koss

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I am 30 years old and do not know a lot about Mutual Funds. My husband and I want to start saving money for retirement. We met with a financial representitive last month. I clearly indicated that we wanted a totally safe and conservative portfolio (now I'm learning nothing is totally safe when you are investing?)

He showed me some funds with charts that were going up (2007). He said this was the best portfiolio. That day, I put the stock symbols into yahoo finance and put pretend money in. The value is tanking fast. Some of the other funds (bond funds that he did not recommend but I asked for) are holding steady.

The finacial guy sent me an email to see if I was ready to set it all up. I replied that these funds went down about 50% in the last month and asked if I should switch to the more conservative bond funds.

No answer for two weeks.

He called yesterday and said that we should really get this set up right away so we can at least start investing. He said the funds havent really gone down that much. Now is a great time to start.

I looked at the yahoo message boards and learned that he would receive over 5% plus 2% per year for selling me the funds he put in my portfolio.

Is it possible that I am wrong and it is a good time to invest?
 
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David S. Roberson

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Sounds more like a good time for your broker to have you invest. Keep your cash. At least for 6 months.
 

TJSum

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Maryland
You can buy Mutual Funds directly from the company itself at no cost.

No one knows when it is the right time to buy/sell, for those who know that, they would not be working, they would be laying on the beach counting their money. It is nearly impossible to time the market because you have to be corrrect twice (when to get out and then when to get back in). Many brag about selling before things hit bottom, but they usually lose out on the gains on the way back up.

So far, IMHO the best way to invest is to pick a couple solid balanced mutual funds that are invested in many different asset classes. Then dollar cost average a monthly flat rate into them each month without fail. (It is hard to do in our feast or famine profession). If you do this, you will automatically buy more shares when prices are down and less when prices are up. Let's say you do this for ten years, the mutual fund might average only a 5% annual gain, but with the dollar cost averaging aspect included, your gains will be much higher than that. It is the only "fool proof" way to time the market and takes your emotions out of it which is a very good thing. Yes, it is boring and you will not get rich quick, but for those with time on their side, it is the best way to go. Mandi, you are only 30, so time is very much on your side, and yes now would be a perfect time to get started on the monthly installments. So what if it hasn't hit bottom yet, you are not throwing in a huge lump sum, but rather safetly dollar cost averaging. :clapping:

P.S. Some funds require a minimum to get started, not sure of those that are the lowest, maybe others can weigh in on that, I believe American Century Funds has a low initial investment. I like their One Choice Portfolios that offer five options depending on your age and risk tolerance.
 
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