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THE ANSWER DESK . . . ARCHIVES
Volume 182: To submit a question to
MFI's panel of experts, please write to us.
This week's panel:
| Paul Merriman
 Paul
Merriman, one of America's top financial advisors and asset managers,
manages over $300 million using buy-and-hold and market timing strategies
and is one of the nation's top experts on mutual fund investing. Paul
Merriman is president of the Merriman
Capital Management, Inc., a Registered Investment Advisory firm, and
co-portfolio manager of the Merriman
Family of Mutual Funds. He is also the Publisher and Editor of FundAdvice.com,
a newsletter and hotline service dedicated to investing in no-load mutual
funds.
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Lou Stanasolovich
 Louis
P. Stanasolovich, CFP is founder, CEO, and President of Legend Financial
Advisors, Inc., a fee-only financial advisory firm based in Pittsburgh,
Pennsylvania. The firm provides comprehensive financial planning as
well as asset and portfolio management services to affluent,
soon-to-be-affluent, and wealthy individuals. Mr. Stanasolovich has
been selected by Worth Magazine as one of the Best Financial Advisors in
America four times and by Medical Economics as one of the Best Financial
Advisors in America for Doctors three times. His investment process
has been profiled in Business Week, Morningstar Investor, USA Today and on
the Internet publication, TheStreet.com. He can be reached at legend@legend-financial.com,
www.legend-financial.com,
or at (412) 635-9210.
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Questions and Responses
Should I abandon growth and income funds?
In which money market fund should I place the proceeds of my
mortgage refinancing?
Previous
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Next
volume
Should I abandon growth and income funds?
from Lori
Q: My
growth and income mutual funds in my retirement plan have been losing money for
several months, and I worry about them.
Should
I shift my money to equity-type funds that are lower risk, or should I keep the
ones I have and make new investments in equity funds?
What
funds would you consider safe, sound investments for the long term, say 20 to 25
years?
A: (Paul) The funds you have now are
equity funds, and they are among the lowest-risk types of equity funds. If you
have 20 or more years before you will need this money, you should welcome the
current market slump as an opportunity to buy more shares of funds at lower
prices.
Market declines are normal, and you
should expect them to occur from time to time. The trick is to get through them
without derailing a long-term investment strategy. If you are concerned about
the losses you have experienced recently, then you have probably exceeded your
risk tolerance.
To reduce the risk of your portfolio,
you should add fixed-income funds. A short-term bond fund is an easy way to add
ballast to your investments. Over the long haul, fixed-income funds have
produced lower returns than stock funds, and if you have a 20-year or longer
time horizon, the great bulk of your portfolio should be in stock funds, not
fixed-income funds. A good way to start is with a mix of 20 percent fixed-income
funds and see if that tames your portfolio’s volatility enough for you.
If you’re looking for sound
investments for the long term, look for low-cost funds, especially index funds
if they are available to you, that invest in the right mix of assets. This means
you need large-cap funds and small-cap ones. It means you need growth funds and
value funds. And it means you need international funds.
To learn why that is so, go to my Web site, www.Fundadvice.com,
and read an article called “The Best Buy-and-Hold Strategy we Know.”
In which money market fund should I place the proceeds of my
mortgage refinancing?
from Ralph
Q: I just refinanced my mortgage and plan to use the proceeds to
consolidate debt and put some in a mutual fund. I want to put the money (about
$40,000) in a Money Market while I'm deciding what I want to do with it.
Can you recommend any money market funds I might consider that have had the
best returns and do you recommend I put the money in one more than one fund?
A: (Lou) We usually recommend
Vanguard's money market funds. They typically are among the better paying money
market funds due primarily to their low expense ratio. They also don't buy lower
rated underlying securities. Others that pay slightly higher yields many times
do, and periodically they have had a security default.
We do not recommend splitting the monies. While not FDIC insured, money
market mutual funds have a terrific record of no investor ever losing money. The
Securities and Exchange Commission scrutinizes these funds more closely.
Important Disclaimer
Investing in equities involves a serious
principal risk, and no assurance can be given that the techniques described here
will be successful. Returns vary and you may have a gain or loss when you sell
your shares. Past performance is no guarantee of future results. Index returns
shown are historical and include the change in share price, reinvestment of
dividends, and capital gains. Indexes are unmanaged and do not reflect the
impact of transaction costs. Transaction costs would have reduced the total
returns.
International investments, especially those in
emerging markets, entail greater risks (as well as greater potential rewards)
than U.S. investing. These risks include political and economic uncertainties of
foreign countries, as well as the risk of currency fluctuations. These risks are
magnified in countries with emerging markets, since these countries may have
relatively unstable governments and less-established markets and economies.
Lastly, the questions and responses set forth
here are for general informational purposes only and are not intended to
substitute for performing your own independent research or contacting your
financial or legal professional before making any investment decisions. We make
no guarantees as to the performance of any investment strategy you choose and
are not responsible for any losses you might incur.
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