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Author: bstpierre One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75806  
Subject: Re: 401K drop in value Date: 5/22/2000 9:29 PM
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I called my fund manager [adp??] and he told me those were actually looses [sic].

You only lose money when you sell. (You also only make money when you sell.) The statement that you have received only reflects the value of your investment at a given point in time. It is kind of like your house, or baseball cards, or rare books.

Say you pay $1 for a widget today. Next week, widgets just like yours are being sold for $.50. You haven't lost anything, right? You've still got your widget. If you decide to sell your widget (i.e. trade it for cash) then you will have $.50, which is $.50 less than you started with.

However, say you decide to hang onto your widget for a while. Maybe in six weeks people are selling identical widgets for $1.50. You aren't any richer -- all you've got is a widget, remember? However, if you decide to trade your widget for cash (i.e. sell it), then you'll have $1.50, which is $.50 more than what you started with.

Who knows, maybe you'll never need the cash that you could get from selling your widget. Maybe you'll grow old and die and leave it to your kids, or your alma mater, or something...

Now I am really confused....can some one put me on the right track?

I hope this helps a little bit. It might be good for you to go to the Fool's 401k Info Pages ( http://www.fool.com/money/401k/401k.htm?ref=G02C05 )and do a little reading. Maybe buy a book or something to learn about this stuff.

-bs
(what is written above is a bit of an oversimplification of what is going on, but I hope it gives you a little bit of an idea to work with...)
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