MARLA'S MUSINGS

. . . from the Publisher of Brill's Mutual Funds Interactive^®

Who Wants To Be A Millionaire?

by Marla Brill
Publisher, Brill’s Mutual Funds Interactive

Do you feel rich?

Even with the recent stock market downdrafts, the long bull market has made account balances for many mutual fund investors fatter than they ever thought possible. The question is, how are ordinary folks reacting to this new-found wealth? Are they buying their dream homes, or taking extravagant European vacations?

Judging from a provocative discussion thread recently at our Main Newsgroup, the long bull market has changed lives in more subtle ways. Some of our newsgroup regulars are feeling a bit more secure about retirement, or are considering taking that step earlier because of they now have the resources to do so. Others find their euphoria tempered by taxes on their gains.

"For us retirees, the wealth effect can be what we live on," says JD. "By limiting our withdrawal rate, we can live okay in the down years. And in the record years like this past one, our standard of living can rise dramatically."

Newsgroup regular Paul Siu notes, "Older folks who are lucky to be in this bull market have probably found that they reached their goal much sooner. Many probably opted for early retirement."

As for himself, Siu says "my lifestyle has become less extravagant as my net worth doubled and then tripled….I am saving more of my income and reducing my debt."

Stock market gains prompted Jim Shishido, a/k/a 401kdaytrader, to sell a rental property that wasn’t living up to expectations. "Because of recent paper gains in the 401(k) plan, we no longer felt that making money on the sale of that property was important to us, so we lowered the original price by 30 percent and told the agent we would double everyone’s commission is they would sell it. Had it not been for the feeling that we are better off now and that we see the 401(k) plan as being the key to our financial future, we might have done something different."

Several MFI'ers have mixed feelings about their gains because of the tax bite they’ve experienced, or anticipate down the road. "Uncle Sam has done very well from taxing my dividend and capital gain distributions over the last few years," writes Paul H. "That’s the taxable half of my portfolio. The tax-deferred half will get taxed as I take it out beginning in my late sixties and beyond. Uncle Sam will do pretty well then, too."

"Each year I have to come up with more money to pay the capital gains tax on my mutual fund investments," writes Chuck. "There is a price to success."

That price, says regular poster Ragu, includes a new greed mentality among the general populace. "It creates shows like ‘Who Wants To Be A Millionaire,’ and increases coverage of this month’s lotto winners or those Internut IPO millionaires. If you notice, the concept of long-term slow, steady accumulation of wealth in the market has been shifted to a quicker, anyone can do it message."

But investors may be overdue for a wakeup call, notes Roberta. "…although I appreciate the great gains made lately, I am well cognizant that they can disappear as rapidly as they have appeared."

What are your thoughts on stock market gains? Share them, or any other mutual fund-related insights or observations, at our The MFI Community Main Newsgroup.