After three quarters of seeing my mutual funds hemmorage, I'm thinking of converting them to CDs.

[Obamarama]

I'm sick of seeing what's been earned on them sucked into the abyss of the Bush economy. I'm thinking of parking the money in CDs until this mess rebounds somewhat (2-3 years? 5? More? Who really knows).


Has anyone else done this? Anyone else thinking about doing it? Any pros/cons to this approach that anyone knows about. I am going to talk to my financial advisor, but wanted to see what "real folks" think about this strategy as well. It sounds like a prudent move to me, but then again I could be all wet.

[truebrit71]

1. Make sure that the CD's are fully insured and don't put more than 100k in any one..

...Also be VERY careful about which bank you buy the CD's from...insured or not, if the bank goes belly-up it is a pain in the ass to collect your money.

I have been 100% cash for three months now...

[msongs]

2. agree. hopefully the fed will start raising interest rates to fight inflation and then

bank saving and CD rates will rise. started out at 5% a year ago and now mine are down to 3%. considering the inflation rate is pushing 10% or so thanks to gas, its a losing deal right now.

msongs

[Tierra_y_Libertad]

3. I switched from a Balanced fund to a money market fund 3 weeks ago.

Not making much is a helluva lot better than losing a lot.

[HereSince1628]

4. Did it last fall. We keep our CD's in short term mostly 1 year or less

and we've laddered the investments so that every month some are maturing.

We aren't making the highest rates, but we've got the flexibility of being able to redirect some of it every month.

[Fovea]

5. Like a huge stack of conferate currency.

I would not lean on the full faith of a nation that is about to erupt into civil war.

[davekriss]

6. I moved to 60% cash the last time the DOW tipped 14,000 (nt)

[slackmaster]

15. Good move

I sold my precious metals when gold topped $1,000 per ounce.

[RebelOne]

7. I am thinking of pulling my IRA and 401K

and converting them to CDs. My IRA just took a $500 hit in the last statement. I haven't gotten my 401K statement yet, but if that shows any big loss, I am definitely cashing in.

[A HERETIC I AM]

9. So let me get this straight....

You are considering liquidating the investments in 2 Tax-Deferred accounts, something which will cost you a large percentage in IRS penalties and taxes (presuming you are younger than 59 1/2) so that you can earn...what? 3.5%? 5% tops if you get 5 year notes?

Sorry..but...are you fucking crazy?

There is absolutely NOTHING stopping you from re-allocating your 401(K) investments into less volatile investments inside the 401(K). The 401(K) plan that does NOT offer either a Money Market or some sort of "Stable Value Fund" option would be a rare bird indeed. If you have an IRA, the same applies. Unless your IRA is at a bank which offers a seriously limited scope of choices, you can do anything you want with the money, INCLUDING buying CD's inside the IRA.

[seabeyond]

8. we started putting our into cd's. at least i am

gaining, not tons, but earning, not losing.

i wasnt comfortable with market since 2002, 2003 and so money just sat. a couple years ago hubby put into cd. and since we have just done that. working for us. short term that roll over.

[Yavin4]

10. Depends on How Close You Are To Retirement

If you're within 10 years, then you should be out of the market. If not, leave it in. You will be crushed on fees and penalties, a hit bigger than the one you're going through.

Also, if Obama wins this election, our economic ship will be set straight because Obama will bring in wiser, saner economic and financial policies which will get us through this crisis.

Bush will be gone in a little over 6 months, and when we pull out of Iraq, our economy will get back on its feet.

In sum, stay the course, and actually think about buying more stocks.

[raccoon]

11. I'm in the same boat you are. I've thought about getting out of mutuals

and into CD's.

I'm thinking hard about doing this.

[A HERETIC I AM]

12. Selling a well diversified portfolio for emotional reasons...

is exactly why most retail investors get killed in the long run. (presuming, of course, that what you have is indeed well diversified)

What mutual funds are they? What is their track record? How well did they perform from 1999 through 2003? What is their 10-year average annual return? How about their "Since inception" total return? How many more shares do you now own, merely because of reinvesting interest, capital gains and dividends? Are you ahead of your initial investment or not? If not, by how much? How much were you ahead back in September?

Mutual funds are by design LONG TERM INVESTMENTS. Selling at a market low will set you back dramatically. Do you really think the economy will NEVER recover? Do you really think there will be a worldwide depression?

If you do think this way, and have for a while, you really have no business being invested in the market in the first place. But panic selling of a well managed, well diversified Mutual Fund portfolio is totally counterproductive. Following everybody to the "I'm freaking out and I need to sell now!" window is a sure way to lose your ass.

The simple fact is, what's more important is time in the market, not timing the market.

[leftofthedial]

13. I converted mine a few years ago

to food and mortgage payments

[slackmaster]

14. You should have done that a year ago

It's too late now.

I'm thinking of parking the money in CDs until this mess rebounds somewhat (2-3 years? 5? More? Who really knows).

Nobody can predict the future, but if you wait until the mess rebounds before getting back into the market, you will have missed the boat yet again.

In my personal opinion, you are better off leaving your money where it is.

I could easily be wrong.

[ThomWV]

16. In the worst of times some companies do well

And historically its the same industries for the same reasons. Make use of that information.