Should I sell off my mutual funds?

Question

The way the economy is going, I'm afraid I will loose all the money I have invested. I've already lost over 10% and it is alot of money. Should I cash out of my mutual fund investments and put it all in savings or money market accouts? I don't have any stock.

Answer 1

Depends on when you need the money and how much watching it go down is driving you nuts.

If you need the money within a few years, it probably shouldn't have been in the stock market to begin with. Sell and put the money into CDs that mature on the dates when you know you'll need the money (when tuition is due, etc.)

If you don't need the money for several years or longer, consider leaving it in the stock market. Just to be clear, if you are in equity mutual funds, you are in the stock market, whether you know it or not.

Important - leave it in AS LONG AS YOU KNOW what it is that you own and you're confident that you don't own something that is more dangerous than the overall market. If you own some crazy fund that goes up and down way more than the market, be very very careful.

Last thing: if you really, really can't stand watching your account value go down, sell some or move it into less volatile funds. This market could keep going down, for sure. But, if you are several years or longer away from when you need the money, try to keep it in the market - over history, the market has declined for short periods (couple-few years) but has risen in the long term.  

Good luck -

Answer 2

You won't lose all your money in a Mutual Fund. Even if you put it in a Savings Account or CD you will lose money due to taxes and inflation. Look at the long term Dow chart since the Depression, UP!

Answer 3

Mutual funds are long term investments, and should never be looked at as short term.

With funds, you never sell in a down maket

The market goes up and down, the market will be back, so if you take your loss, how do you make that back, there's no way you'll do it in a savings account.

Answer 4

"The general answer is no. Depending on your fund(s). Mutual funds typically have over 150 stocks invested and will always come back up. ALWAYS!"

some mutual funds never come back

Answer 5

my suggestion to u is.

- cash out all the money u have in mutual fund.

- don't invest in any investment plan.

- don't keep U.S dollars too much. just keep enough for u to pay ur bill n spend .

- use the U.S dollars to Gold for long term. b/c by keeping gold u don't really lost a price on it (depend on the market). n it safe as well it doesn't go up n down too fast.

- use the U.S dollars to Silver for short term. if u want to earn money fast u should go with silver. it just kinna like stock it go up n down fast. but u know that u r gonna make money out of it.

Answer 6

So, you pull out your money (sell low) and then the market starts ging up and you buy back in (buy high). That's NOT how to invest.

Hopefully you did an honest assessment on your risk tolerance before you started investing and set up a good asset allocation with bonds included and made sure your costs were very low and you used index funds.The market goes up and down. It always will. Ignore the noise.

If you didn't assess your risk tolerance and set up an asset allocation that works for you, now is an excellent time to do it. Here's a site that gives you links to risk assessment quizzes and tells you how to set up a good asset allocation.

http://www.saveyournestegg.com/diy.html

Remember that NO ONE knows what will happen to the market in the future. NO ONE predicted 9-11. NO ONE knew when the tech tocks would start dumping or when they would recover. Lot's of people guessed, and guessed wrong

Answer 7

In six months my stocks has a spread of 41% meaning the point where they were lowest till when they recovered and gained.   They did that the year before too.   Chances are and funds will recover much quicker than they go down.  For instance something may go down a year before they spend a month going right back up again.  That's what makes timing so hard.

Answer 8

Since you have mutual funds, you have stocks.

Mutual funds are always below DOW performance and usually suck, you are lucky with a 10% loss.

Keep them and sell, when the Dow is back up at 13,000

Answer 9

LOL you can tell when someone is a bad trader/investor with advice like "keep it and sell when the market hits 13000." So you hold through the mess and losses and moment the markets turn around for profits you are out, sounds like genius logic to me.

The other poster that recommended buying silver and gold another big mistake, just cuz silver and gold are enjoying the commodities boom does not mean that their long term charts have lagged even treasury bills, at these heights if you buy them expect to lose 80% of your money at some point in the next decade. Although she is right that their value wont go to zero it doesnt mean its a good long term investment.

Back to the question at hand, the market is down 20% and you are down10% so its not so bad. You held through most of the BS, unless you are retiring next year keep the money for the long haul, and my advice is not to even look at it, it is only going to tempt you to make mistakes. If you want to beat inflation you simply have to ride the market thats the trade off. If you dont want to lose principle just park your cash in bonds but dont hope to beat inflation by any meaningful margin.

Answer 10

The general answer is no. Depending on your fund(s). Mutual funds typically have over 150 stocks invested and will always come back up. ALWAYS!

If anything, buy more. I teach my clients this all the time. If the market is down, think of it as the market is on sale.

A stable fund is  your best bet, look at American Funds,  they have some great funds that are great for the average investor.

Answer 11

How old are you?

If you have time , that is if you are under 55 year old, than ,

NO, BIG MISTAKE, that is buying high and selling low, do not do that to yourself. Look at history, the market always comes back and goes higher!!!

Panic will only lose you money. So it is down now, so what, when you sell in 10 years or more you will have made a lot of money.

If you are 55, than yes sell some, about 40% and put it into Bonds, then at 60 sell another 30%, and at 65 put another 20% into safety, perserving your money and getting interest to live on. Leave about 10% in equities, until about 70 and put it all into preservation.

Any questions, please feel free to email me.

Answer 12

It also depend on your age, time frame and risk tolerance.

If your time frame is under 5 years, you should not be in the stock market.

If you time frame is 10-15 or more years, I would be dollar cost averaging each month, and would be in the market.

If you are not comfortable with what you are holding I would seek a professional advisor with 10-15 years experience that can help you.

Most people buy high and sell low. When I hear this, it means its time to get an experienced professional who can help guide you during these turbulent times.

I have to disagree a little with fellow contributor Repairmanjack. True no one knows anything with absolute no fail guarantee. With that said, the old adage, "the market is always telling a story" is true.

There were reports years before 911 that warned of terror groups may use planes to crash into major US buildings, and the WTC was listed as a high profile target. I wrote a research report on International Terrorism covering 1945 to 1993.

RE: tech stocks. We had 2 years warning before the .com crash (1998-2000 hike in rates), then the technical break down on NASDAQ 3rd week of Mar 2000 was the final sell signal to get out of tech and .coms, and stocks in general. Advised clients back then at the time.

Recovery, market bottom Oct 2002, after 30 year low interest rates and technical buy on the S&P500.

Real estate. I have written tons of articles here, and warning about the crash would come. 1st sign was FED rate increase in spring 2004 and continued rate increased to 2006. What killed the .coms also killed the housing market.

History.

Average Bear Market (S&P 500) is over 20 months with a 34% drop from the high. As of 07-01-08, the S&P has dropped 18%.

In a Bear Market it is not unusual to see a a sharp rebound from a low even as high as 50%, then fall again below the previous low. On 11-07-07 (S&P 500 peaked at 2085.49 (a "sell signal" generated on the "Daily" chart).

A buy signal was generated on 03-11-08 S&P 500 temp bottom at 1587.97 (day chart) - a 24% drop from the Nov 2007 high.

Another sell signal was generated on 05-09-08, S&P @ 1812.45 - a 12.39% rebound before the sell signal.

The S&P has fallen to current 1283.00 (inter day trading on 07-02-08 - a 29.20% drop from prev 05-09-08 high), and there is no definitive long term buy signal.

Where are we going?

No guarantees of course, but the (weekly) chart of the S&P suggests support at around 1450 is possible. Then a trading range from there to 1670 with plenty of volatility.

The point is there are a ton of indicators to look for that can help with anticipating price movements in the market. For most people this is not easy to do, hence the purpose of mutual funds.

If one spends 40-50+ hrs a week studying the markets and with nearly 20 years doing this, one will, pick up on things, learn patterns, history, know who to listen to who to avoid.

I tell people all the time that investing can be easy.

1. Open and max out contributions to a Roth IRA.

2. Invest in the S&P 500 Index for 10-15 years or longer by dollar cost averaging each month (auto invest from a checking or savings).

3. Be sure to reinvest all dividends in the S&P 500 Index. This is what made the difference from average performance to stellar performance over the last 50 years.

Good Luck!

Answer 13

Yes. Get out of U.S. equities. There is no reason to own any U.S. stocks for the next year or two. Stagflation is occuring. Inflation is occuring at a faster rate then what is offered on U.S. treasuries because the federal reserve temporarily dropped rates to bail out sub prime homeowners and investment banks. This will turn into a very bad situation very quickly. In order to combat rampant inflation, the federal reserve will have to raise interest rates to significant levels similar to that which occurred in the 1980's when government bonds offered 18%. In the 1980's there was a severe shortage of oil as well. Dramatic price increases for raw materials has created an incredible amount of inflation, and is killing demand and stifling growth, not only here but abroad as well.

The bull market began in real estate, spilled over to the stock market and has now spilled over to commodities. The bear market began in real estate, has now spilled over to the stock market and will inevitably spill over to the commodity market. This is how cycles work. There is now a fundamental cyclical change in the stock market downward. We have entered into a very severe bear market that may last several years. All time highs are signs of market tops, and that occured in October. The clearest sign of a long term on set of a bear market in stocks is when banks and investment banks begin to go on the brink of bankruptcy. This happened with Bear Sterns. It is now happening with Lehman Brothers, Wachovia, Citigroup, Bank of America and many others.

If one looks at a long term trend of the Dow Jones Industrial Average (DJI) one will see a parabolic upward slope between 2002 and 2007, that tops in October of 2007. Some may say that "because the Dow Jones has pulled back, this is a buying opportunity". This is not the case because the bear trend so far is not gradual. It is a volatile parabolic trend downwards that has so far lost 20%. Long term bear markets are defined as atleast a 20% drop in price. This has just happened. In bear markets, stocks tend to loose half their value, so expect further declines into the next two years. In all actuality, the broad scale of indexes has fallen much further, but the only thing buoying the broad S&P 500 and DJIA are energy related companies. When energy prices finally become too high, these stocks will inevitably drop and sink the broad indexes.

A clear sign that we are at a market top is the number of people who answered the question by optimistically by telling you not to sell. They are in denial whether they no it or not. Many of these people have never even seen a bear market and have no realization of the devestation it can do. Because they are young and have never lived through a real bear market, many of them are unable to identify the signs of a market collapse. Many of them will become victims of this current bubble. These are the same people who believe stocks never go down.

On a last note, there is no possible way we are at a market bottom. Stocks are not hated yet. The true believers are still holding. Put your money in a money market account. The fed is about to raise interest rates to combat inflation, thus your yield will get higher and higher. In the financial world, whenever rates rise, stocks fall because there is more incentive to savings as yields become higher and higher. For the question of when to buy stocks again... Wait until stocks are hated. Wait until you see a number of public companies go bankrupt. When this occurs, it is a buying opportunity. When stocks are the most hated, it will be a buying opportunity to go back into mutual funds.

In the meantime, you may also want to look into buying Swiss Francs and Japanese Yen. These currencies are inversely related to the U.S. dollar and are safe havens because these governments have a strong control on supply, unlike the U.S. There is no reason to be in any stocks right now. A global recession is on the verge caused in part by high raw material costs and a cyclical change in consumer behavior. Market corrections are good. They are like a forest fire. Forest fires clean out the underbrush to allow for more future growth.

Good luck.