What to do with mutual funds while the dollar plummets.

[The Night Owl]

I have some money in a mutual fund. Should I pull the money out and put it in the bank? Or, should I wait a while longer to see what happens with the dollar?

:scared:

[nadinbrzezinski]

1. Talk ti a financial analsyst

We have gone into gold after calling in our gov'ment debt

[tridim]

2. I've had mine in a money market account since 2000

Although I must admit, I have no idea what a money market is. The return sucks, but it's always been stable. I hope it isn't connected to the dollar's value. Any financial people have some advice?

[Yupster]

7. A money market fund

is basically a mix of bank accounts. You're just in a bank account probably paying just about right at 1 % interest per year.

[girl gone mad]

13. She or he should be able to get closer to 2%..

in a MM fund these days. Interest rates have gone up.

[lindashaw]

3. You can cash your holding in the fund and let it sit there or re-

allocate it to a 6-month CD.

[NewHampshireDem]

5. That, without a doubt, would the one of the WORST things to do

If the dollar crashes, inflation will rise, and your money will be locked into a low interest rate CD for 6 months.

I guess free advice is really worth what you pay for it.

[Yupster]

8. Agree New Hampshire

The poster probably paid a charge to buy the fund originally. Take the money out for a 6 month cd and try to buy back in two years from now and you hit yourself with another sales charge. Bad advice.

[MallRat]

4. Well, some mutual funds companies have gold funds.

:-)

Just out of curiosity, I looked it up. Fidelity has one (FSAGX). Plummetted from $29 to $21 this past spring, but has since climbed right back up to $29 again. Sounds pretty volatile.

I don't know the first thing about investing in precious metals (or for that matter, whether you should be sufficiently freaked out to warrant investing in gold), so talk to a financial advisor.

-MR

[girl gone mad]

14. I'm not a financial advisor, or an accountant..

but I would think the first thing to know about investing in precious metals is to buy the real thing, not a mining fund or gold stock.

Gold and precious metals have traditionally functioned as insurance against economic turmoil, rather than as investment tools. If there is a collapse in the dollar, you'll be better off holding gold coins than holding a piece of paper that says you own gold. There is expense related to buying and keeping gold (commissions, safety deposit box or home safe), which is another reason metals don't usually yield high returns.

[Yupster]

6. What about a foreign stock fund

When John Edwardsds disclosed his financial holdings, his # 1 holding was Euro-Pacific Growth fund. I laughed when I saw that as he had outsourced his investments.

Seriously, if you're afraid of the dollar, invest overseas and you'll gain by the dollar's drop.

You should be able to transfer to a foreign fund for free.

I have no recommendations of one over another though. Every fund family has some of them.

[Squeech]

9. If the dollar tanks

how will a bank account help you? Wouldn't your bank account still be in dollars?

I don't think a money market account is any better. The money market is basically real short-term corporate paper, "bonds" that mature in three months or less. The idea is that interest rate changes within that time frame wouldn't be significant enough to impact the amount of money lent to the corporation. But they're still denominated in dollars, and beyond that, if you anticipate real economic collapse, the companies that issued the paper might default.

A large-cap stock mutual fund might actually work in your favor, since most large corporations are multinationals nowadays, which means they have significant business presences and assets in places that use currencies other than the dollar. I've got a fair amount of mutual fund shares in my various retirement accounts that I hope will continue to be worth something, and my new 401k contributions right now are buying me an international stock fund.

I don't advise gold, because I don't see any plausible scenario where the dollar tanks but markets that respect gold would survive, at least not at the level you would need-- you'll probably never be able to buy your groceries with a Krugerrand.

If you're really paranoid, however, you could open a Swiss bank account in gold, or in Euros.

[cliss]

10. I'm inclined to agree with you.

There's no doubt about it: the dollar is tanking. It's going to go down quite a bit over the next few months.

John Snow has made it clear he's watching the patient get sicker by the day. However, he's not going to do anything for a while yet.

You have to look at the underlying forces -- the Bush administration wanted this. They had many reasons for pulling the plug on the dollar. Steve Roach echoed this in his latest speech - he said it was a good thing for our current deficit and international currencies. So they want this, and they're not going to step in to support the dollar for quite a bit yet. If the currency starts to flat-line, then maybe they'll do something. Otherwise - no.

I personally think it's better to ride out the storm. At this point, it's probably not a good idea to invest in the Euro. Anybody that does will be one of those "Late arrivals" who sees a definite trend, and jumps on. They pay more than the person who invested a while back. Remember the old saying, "buy low and sell high".

I'm also not in favor of buying a lot of gold. Storage is a problem. If I do that, I'm assuming that our market is going to completely belly-up (it won't -- it'll just be a rough ride for a while). Now there's nothing wrong in buying maybe $2,000 worth of gold coins (you can buy them from a coin dealer) and stashing them in the family fireproof safe. Otherwise, don't sell your house to invest everything into precious metals. People did that in the late 70's and lost plenty.

Just stay cool for the time being. Try to catch trends on the upswing - like foreign currency, but try to be diversified.

[joanski01]

11. All of my pension money is

invested in the Dreyfus Bond Market Index fund. Is that as safe as anything else. After bush* got selected, I moved my money from stocks into the "safe" fund. But is it safe?

[Comadreja]

12. My question exactly

I keep reminding myself that with this troop of corporatist stooges in office, nothing is certain except that the private sector will get more power over you and your money. I have decided that I will transfer my own Roth IRA into aa bank deposit. Reason? It will be covered by a (so far) intact FDIC out in place by our allies from the past.

[cliss]

17. Bond funds should stay stable

they're certainly much safer investments than the stock market. I've not heard anything bad from the Dreyfus Fund.

Suggestion: go to their website. Check your particular fund. Find out who the Fund Manager is. Get every scrap of information on this person. Is he/she qualified? How many years in the business. 2 months out of college? Dump it.

I did this with our pension plan at work. We had some rep show up from Columbia Funds. He was blabbing about "your retirement etc etc". I knew better. I blasted him about the fact that 3 (!!!) fund managers had just recently jumped ship. He got embarrassed and tried to cover this fact up. The other employees knew nothing about this, and eyed him suspiciously.

Sure enough, within a year Columbia Funds was in the news about fraud and their pension funds tanked. You should find out as much as you can about Dreyfus. Check the Internet for articles. Look under "Is Dreyfus Bond Fund safe?" You can actually search like that, and you should get plenty of information.

*ps: I'm not a financial planner like the poster below. However, it's in the family.

[girl gone mad]

15. Good points, however..

I don't agree that it is too late to invest in foreign currency, so long as one has cautious timing. People were saying it was too late to invest in the Euro over a year ago, when it was $1.15.

Right now much is being made in the media of the dollar's decline. Russia is beginning to sell dollars. Because of the hype, this is probably not a buying opportunity. On the other hand, consumer confidence is high and Americans still seem naively optimistic about the future. China and Japan will probably avoid doing anything to further erode the dollar, at least for the time being. As a result, I think there is a good chance we will see the dollar recover somewhat over the coming months, and that could present a buying opportunity.

Once Bush starts messing around with the tax code and pushing through SS privatization, we're likely to see even bigger declines. The unknowable factors which could hasten a drop in the dollar are war with Iran and another terrorist attack. Of curse, China and Japan could react positively to the coming interest rate hike.

I also agree with you that one is best with a small position in gold (5%). Gold should hold up better than paper currency, not because it will be honored by any country, but simply due to its rarity and historic value.

[Ugnmoose]

16. I am a Certified Financial Planner

I hate to be vague but my answer is it depends. If the money is not needed for at least ten years (I am assuming it is invested in U.S. Stocks) I probably would leave it alone. Of course it also depends on your stomach. If the fund lost 50% in value would you start to wretch? If so, you might want to go another route. Perhaps something that is globally balanced (both U.S. and International stocks and bonds) might be appropriate. If you are not adept at making these kinds of decision you should consider an asset allocation fund in which the manager has broad disgression to invest in whatever he or she thinks is viable. Find a manager whose performance has been good in down markets (top 25th percentile). You might want to look at the Pimco All Asset Fund as a suggestion. The manager has a verifiable track record using tactical asset allocation (moving money around). Right now he is very bearish on U.S. Stocks.

[Peak_Oil]

18. I'm a financial planner as well.

I'm getting out of the business. It's my opinion that we're headed for a financial shitstorm in the next five years or so, primarily related to the trade deficit, massive government debt, and an energy crisis all happening at the same time.

I think it's gonna get ugly.

I've been debating with myself about real estate prices. I can't decide if real estate is in a bubble (possible) or if it's just that the dollar has fallen so much (possible). Really, I can't tell. I don't think we'll really know until it's over which one it was.

Could be both, as well.

I'm thinking a foreign bond fund might be OK as might a foreign stock fund. In my opinion again, holding 5% of assets in physical gold in a safe deposit box at a bank is not a bad idea. That's really more of a disaster mitigation plan than an investment, but to truly diversify your portfolio, it's not that bad of an idea.

My managed futures portfolio has done OK lately. I wouldn't necessarily recommend it for anybody, it's a very individual choice.

Things have gone so well for so long that it's hard to find an investment strategy that will account for all the chaos out there. We're not used to it.

Check Pimco's Bill Gross for his comments on the economic times ahead, as well as Sir John Templeton's outlook. Stephen Roach is howling about the sky falling these days, but he's always like that. Another guy worth checking out is Matthew Simmons, president of Simmons and Company, a global energy investment banker.