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The mutual fund tanked. I now want to roll it over into?? ... your thoughts please.
I have the option of opening a CD IRA at my credit union that is now paying 5.30%. Any sage advisors out there? What would you invest it in given the current market? I am 7 years from retirement.
Okay, let me get this straight you had it in four mutual funds. The stock market tanked you got scared and cashed it out? hmmm okay.
As for the CD IRa - AVOID IT. You need to realize what the underlying value of the asset is. A CD IRA is a cash based investment and it is one of the worst investments you can make. The 5.30% interest isn't enough because you get taxed on it and cash is subject to inflation. In 2000 gas was 99 cents, now it is 3 dollars. That is because the USD ALWAYS goes down on the long term. For my gasoline scenario that is about 37% inflation per year. So as you can see, avoid cash based invesments this includes - money market funds, CDs, and bonds. Cash investments are only good when you are strategically investing and you believe that asset prices are going to tank soon. Cash as a long term investment is stupid.
So where to put the money?
20% into precious metals like gold and silver. Last year gold went up 40% and silver went up 25%.
80% into stocks. Now I know you just cashed out but the stock market is where money is made. The only thing you went wrong is that you didn't do your homework and you bought bad funds. Read the newspaper and see what is going on in the world. Obviously Real estate is tanking, the USD is tanking, banks are taking massive losses, home builders are going bankrupt, retailers getting lowered than expected earnings and commodities are booming. What I personally like is solid companies that pay good dividends and have a pe ratio between 5 and 10 among other indicators.
I have been very successful with this portfolio my PM portfolio went up about 30% and my stocks went up 22% (that includes dividends).
Right now if you have a long term horizon for this money, panicking and moving it into bonds is foolish IMO. Volatility over the past few days is NORMAL for the stock market. The smart money will stay the course over the long term.
Also, moving a sizable chunck of your portfolio into a "sector" fund (ie metals) is extremely riskly and right now you'd probably be buying at the peak....can it really sustain 10-15% appreciation over the long term? You cannot buy past performance.
Do the smart thing and tailor (diversify) a portfolio of stock and bonds to suit your risk tolerance w/low cost mutual funds.
I would look at vanguard, T.Rowe Price, or Fidelity because of their low costs. They all have Retirement funds that are targeted to your retirement date. Go with Retirement 2015 and they will change the underlying investments each year as you near your date and it automatically becomes more conservative as you get closer. Open up an IRA and roll your 401k into it.
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