Here is an interesting thought....

[LeftyFingerPop]

Let's say that you truly believe the economy is totally going to crumble, and you believe that there will be a run on the banks.

Let's also say that the only money you have saved is in your IRA.

So, you have done the prudent thing and sold most of your stocks within that IRA, and most of your funds are sitting in a money market account.

Let's go one step further and say that you are really in a panic, and you want to withdraw that money NOW, and buy non-perishable food with it, because you feel that is your best investment for the future.

Well, you can't withdraw that money without a 10 percent penalty, as well as a tax hit.

Isn't that nice?

The fuckers.

[Orrex]

1. Yeah, but you didn't pay taxes on it while it was sitting there, so what's the problem?

And the 10% penalty was clearly spelled out in the prospectus.


Sure it sucks, but at least the disclosed in advance the ways that it would suck.

[LeftyFingerPop]

2. Yes, but what was not disclosed was that...

our economy would be totally fucking wrecked by greed. That was not in the prospectus.

Also, the fact that our Government would be bailing out failed banks to the tune of over a trillion dollars (my opinion, by the time it is all over)....well, that little tidbit was kind of not disclosed.

[Greyhound]

4. I'll bet you $1000 that it will be over $2T. n/t

[LeftyFingerPop]

5. I won't take that bet. n/t

[Orrex]

6. But the prospectus did include a statement

to the effect that "past performance is no guarantee of future return." That's explicit and inherent in the nature of the beast.

If the DOW had suddenly jumped to 45,000 or so, would all of those IRA investors say "I'm sorry, I wasn't expecting such a huge return on my investment, so I can't possibly accept that?" Well, it went the other way, and now they're stuck with it, too.

I agree 100% that it sucks, but anyone who invested in any aspect of the market with any expectation of guaranteed return, well, they simply didn't read the not-so-fine print.

Tons of people bought B-Share technology stocks as late as 1999 and early 2000, thinking that they were a solid investment. Then, when the tech market jumped into the toilet, all of those shares were suddenly worth shit, and anyone who tried to sell those newly-bought B-Shares to get out of it was spanked with a 5.5% trail that they probably thought was unfair, because their shares had lost so much value.

Sucks, don't it?

But that's how investment goes. If you want liquidity with no risk, then buy a firebox and bury your cash in the basement.

[LeftyFingerPop]

9. If you want liquidity with no risk, then buy a firebox and bury your cash in the basement.

Well, that is what I want to do, except I cannot get my money without getting penalized.

My OP is not about stocks...it is about the fact that I never thought I would be worried about money market funds. Who on earth would expect things to get so bad that you would have to worry about those, regardless of what it says in the prospectus?

[Orrex]

10. Why are you worried about your money market fund?

The phrase "regardless of what it says in the prospectus" doesn't really enter into it, unless the entirety of the money market goes bankrupt, which strikes me as a remote possibility, at best. And, anyway, fund companies can't just ignore their prospectuses when they find them inconvenient or unprofitable.

I can't remember the precise mechanics of it, but fund companies will go to extraordinary lengths to preserve the dollar-per-share NAV, expressly because the pricing structure is outlined in the prospectus. Even small money markets hold many billions of dollars in assets, so the loss of a penny per share on your particular account is the least of their worries; investment companies often hold money market omnibus accounts with hundreds of millions of non-qualified shares--they're the ones who'd raise a stink if their liquid holdings suddenly lost value.

I suspect that perhaps you're (not unreasonably) worried about the bottom dropping out of all of the underlying stocks that make up your money market. If that's the case, then move everything out of corporate and into government money markets. It's a same-day transaction, in all likelihood, though the dividend rate on the government intrument will likely be somewhat lower than the corporate.

A drop in NAV to $0.99 or $0.98 would be a spectacularly unlikely occurrence. Even if you're worried that it might happen, then look at the bright side--the very same IRA that would penalize you for early redemption is in fact protecting you from share depreciation, because you can't jump ship at the first sign of trouble. Presumably, if you have 10,000.000 shares today, you'll have at least 10,000.000 shares next week and the week after, and the NAV will in all probability rebound in the interim. And, anyway, if you could somehow pull out all of that 10,000.000 tax-free and without penalty (as can sometimes be done in cases of extraordinary hardship), you'd only lose $100 or $200 on your 10,000.000 shares.


Disclaimer: I am not a broker, nor am I currently licensed to give investment advice on any professional level. I am simply a somewhat informed citizen commenting on entirely reasonable concerns about the state of the market.

[Greyhound]

3. The whole thing was a scam from the start. They needed the influx of cash to float the system,

and it worked for almost 20 years before the Ponzi scheme fell apart again.

[Orrex]

7. Ponzi scheme is right. I'd love to make that the meme.

Righties love to (baselessly) decry social security as a pyramid scheme, all the while singing the praises of the market, which is--in fact--the ultimate structure for distributing cash to the top.

[Frosty1]

8. Thats why I never put money into an IRA

over the course of time my decision has been validated.