Protect Your 401K

Checked your 401K lately? Going back to about a year ago many of these retirement accounts have shrunk by 30%, some even more. What Happened?

You have been putting money in for years and your employer may have been contributing to your plan also. It is not supposed to get smaller. You are planning to spend that money some time in the future when you decide to quit working. Along with your Social Security payments you should be able to maintain your current lifestyle. But not if your 401K and IRA keep going down and down.

The is no shortage of bad news when mutual funds such as Fidelity Magellan is off more than 30% and Janus 20 is down 63% and I could go on and on. Now you have a sharp pain in your stomach when you read your statement and when you call your broker he gives you the old song and dance about being in there "for the long haul, don't sell". It is not his money.

If you have your 401K with your employer who has a "professional manager" please don't blame the boss. He is at the mercy of that "professional" too who is slowly having you all go broke. These money manglers are taught the three great myths of Wall Street - Do Research, Buy and Hold, Dollar Cost Average. These doctrines have been promoted for so many years that they have become conventional wisdom. You don't need anyone to tell you they do not work. All you have to do is examine the results.

Buy and Hold is the greatest killer of profits. I know. Almost every broker will never tell you to sell when your stock or mutual funds starts declining yet every professional trader will have that as his first rule: have an exit strategy when your investment starts to either lose money or take away profits you have made. If you had been an owner of Janus 20 when it went from 40 to 94 and had a planned exit strategy you would have sold out near 80 to protect your profit. Now it is trading about 35 and after 2 years you have a loss instead of doubling (and keeping) your money.

How can you protect yourself against this type of loss? Don't rely on your broker or financial planner. They have too many clients to be able to watch your money. I said your money. You are the only one who cares. And if you don't want to take an interest in protecting it then you will be eating dog food instead of steak at age 65.

As the mutual funds go up in your 401K or IRA you must take a few minutes once each week or at least once each month to check the price. As you saw the $40 fund advance you set a mental stop-loss value of from 7% to 15% and when it goes down to that price you must immediately transfer those funds either to a different fund that is still advancing or to a Money Market account. It is that simple and there is nothing complicated about it.

If you don't protect your retirement account no one else will. Start today.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

In The News:

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What India's biggest mutual funds bought and sold in July  LivemintInvestors in Indian equity mutual funds bought more last month, unfazed by the selloff that saw the nation's $1.9 trillion market log its worst July in 17 years.
Goldman Sachs Finds 5 Top Stocks Mutual Funds Have Loaded Up On  24/7 Wall St.To say that mutual fund portfolio managers tend to follow the herd is an incredible understatement, and it always has been. While publicly they sometimes seem ...
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Is it time to stop investing in equity mutual fund schemes?  Economic TimesIt is difficult to predict the market but many pundits feel it clearly needs some firm signal from the govt.
Diversify your portfolio by investing a portion in US-focused mutual funds  MoneycontrolDeveloped markets such as US have delivered significant returns over market cycles.
MF shopping list: Top 30 stocks that fund managers bought & sold in June  MoneycontrolMutual funds increased allocation to private banks, consumer, utilities, technology, NBFCs, retail, metals and PSU bank stocks in June, an ICICIdirect report said.
Top 10 stocks that mutual fund managers bought and sold in March 2019  Moneycontrol.comData for equity flows into mutual funds for March came as a breather after a weak February. An increase in net inflows in equity and income category led to the ...
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What India's three largest mutual funds bought and sold in June  Economic TimesHeres what the top three asset managers bought and sold last month.
Why picking the right mutual fund is key in a tough market  LivemintWhy have mutual fund (MF) returns fallen? Mutual funds primarily invest in equity (stocks) or debt (bonds). On the equity side, mid and small cap MFs have given ...
When equity mutual funds offer negative returns, here’s what you do  Economic TimesThe need of the hour is to stay insulated from the panic in the market.
Consider investing in direct stocks only if you can monitor portfolio proactively  LivemintDirect stocks can be considered if you have the ability to do research to identify the stocks to be bought as well as to be sold.You should be revisiting your ...
Top 30 stocks that fund managers bought & sold in July; do you own any?  MoneycontrolMutual funds net bought Rs 14,846.75 crore worth of shares last month. Their inflows into equity funds also improved to Rs 8,113 crore in July, rising nearly 6 ...
Mutual funds’ exposure to this space at all-time high; should you buy?  Economic TimesMoney managers on Dalal Street continued to shower affection on private banks for the ninth successive month as their exposure hit 19.90 per cent in June, ...
Why you should invest in multi cap mutual funds  Economic TimesMany advisors are recommending multi cap funds in the current environment to investors. This scheme which bundles large-, mid- and small cap stocks is often ...
What India's top three mutual funds bought and sold in March  Economic TimesIndias largest money manager held 1.5 trillion rupees in equities.
Sensex's rise from 20K to 40K: 5 lessons for equity mutual fund investors  Economic TimesWe look at some critical lessons that equity fund investors learnt during the journey of Sensex reaching 40K.
Flows into mutual funds revive in May as Modi win seems to spur risk demand  LivemintFlows into Indian equity mutual funds in May rebounded from the smallest in 31 months as Prime Minister Narendra Modi's comfortable electoral win spurred ...
Here are a few mutual funds that stocked up on YES Bank in Q4FY19  Business StandardShares of YES Bank tanked 30 per cent in trade on Tuesday, after the bank reported a massive Rs 1,507 crore loss in the fourth quarter of financial year 2018-19 ...
Mutual funds bet big on these 30 stocks in November; do you own any?  Moneycontrol.comThe Indian equity market rose about 5 percent in November but what was more heartening to see was inflows into mutual funds. Investors pumped Rs 1.4 lakh ...
Mutual fund investors showing great appetite for assuming risk: Dhirendra Kumar  Economic TimesOne would have thought that new investors who came into mutual funds will be running away. But they are getting into riskier category of funds and the scale of ...
Actively-managed large cap mutual funds poised for a comeback  Economic TimesDefying predictions of their imminent irrelevance, some actively-managed large cap mutual fund schemes have bounced back to the top of the return chart.
6 bad money habits that investors should give up  Economic TimesSome habits can exact a heavy toll on your finances. We look at a few common ones that you should give up.
A mutual fund for daughter’s education  Economic TimesIf you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.
Mutual funds shooting themselves in the foot?  Economic TimesWhat if banks take a leaf out of Kotak and HDFC Mutual Funds' decision to direct investors to come another day to get their money instead of paying them on the ...
How concentrated is your mutual fund portfolio?  LivemintA concentrated portfolio can backfire badly if the fund manager's strategy goes wrong.A portfolio with few stocks can fall sharply if share prices of most stocks in ...
Mutual fund SIPs don't make equity investing risk-free. Here's why  Economic TimesSIPs do reduce the risk of market timing & allow investors to buy more units when their price falls.
A young investor’s guide to mutual funds  Economic TimesMany young investors, who are barely a year or two old in their career, are eager to start investing in mutual funds. ETMutualFunds.com receive many queries on ...
Is it time to switch to index mutual funds?  Economic TimesBy Rishabh Parakh It is one of the hottest topics debated these days: is it time for mutual fund investors to switch to passively-managed index funds from their ...
What India's top three mutual funds bought and sold in May  LivemintInflows into Indian equity mutual funds in May rebounded from the smallest in 31 months as Prime Minister Narendra Modi's comfortable electoral win spurred ...
Top 25 equity mutual funds failed to deliver positive returns in June  Economic TimesNEW DELHI: Top 25 mutual fund schemes, managing retail money in excess of $1 billion (Rs 7,000 crore) each, failed to deliver positive returns in June.
Stay away from stock tips  LivemintIf taming the stock market was easy, everyone would do it.Losing money in market is real and facing volatility is part of the deal.
SIPs in equity mutual funds are giving negative returns. What should you do?  Economic TimesSIP returns for many investors in mid- and small-cap funds in the last one year are negative after the sharp market correction. The key is to choose a fund wisely ...
How income from stocks and mutual funds are taxed for an individual  Moneycontrol.comCapital gains from transfer of unlisted share are considered as STCG where period of holding is less than or equal to 24 months, and LTCG when holding period ...
Understand difference between large-cap, mid-cap and multi-cap mutual funds when investing  Economic TimesExperts say large and mid cap mutual funds have carved a niche for themselves in portfolios.
Value mutual funds have given good returns over long term but can underperform in short term  Economic TimesOver the years, the benefits of value investing have been espoused by several market gurus and fund managers. Discussions around this investing philosophy ...

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