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Author: Mishushina Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75793  
Subject: Retirement through Mutual Funds... Date: 9/29/1999 2:57 PM
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Hello all, I took control of my finances about 6 months ago, and well, I still have questions.

I am a government employee, and along with the ususal retirement package, they offer a deferred compensation plan. This allows me to invest pre-tax dollars in a variety of mutual funds or in a no-risk savings pool. I currently have $75.00 going to the savings pool, and $100.00 going to Fidelity Growth.

I originally started the Fidelity Growth when it was at $45 or so, and currently it is up to $63.00. My question, should I reduce the amount I send to the mutual fund until the price drops, or should I just leave it be?

As for changes to my deferrment, I can't just pick up the phone and change it, I must send in the proper form (which I have), then they will process it, and the change takes effect on the next paycheck (providing they have the time to make the change.)

I also have thought of moving the total amount in the mutual fund back to the savings pool. The pool only returns 6.75%, but with the mutual fund so high right now, I'm wondering if I'm investing Foolishly now? Is my money working best for me?

Just to stave off other questions. Yes I am investing in other ways, I am currently taking a hit of about 8% on my foolish 4 (EK, GT, MMM & S), but have only had that going since April (I know, I got in a day late and a few grand short, but it was a start for me).
As for retirement, thats 23 years off, and I have been deffering my money for the past 7 years through my job.

Any advice will be greatly appreciated.
Sorry this took so long, but I have come to relize that when the Foolish community has information, they can come up with a great deal of Wisdom (should I use that word?!?)

Thanks much
Peace
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14144 of 75793
Subject: Re: Retirement through Mutual Funds... Date: 9/30/1999 9:29 AM
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Welcome to the board Peace.

Fundamental to Fooldom is the concept of dollar cost averaging. Because no one--not even the experts--knows what is going to happen and especially when the stock market is as high as it is likely to get, you do better to buy continuously at regular intervals regardless of the price. Therefore, you should continue to buy mutual funds and not transfer funds to your fixed income account.

Although people think the S&P is high at the moment, they have been saying that ever since the Dow passed 3000. Eventually they will be right; so far they have been wrong. Clearly the people who write stock market commentary for newspapers and other media are not experts. They merely fill their alloted space. You would be best off to ignore them.

The Foolish wisdom is that corrections in the stock market can be expected from time to time. These present a nice buying opportunity. But most will not last long. If you try to predict them, you will usually be wrong, and your results will be worse than with dollar averaging.

Each must make his own choices, but for your age, most Fools would advise you to put all your funds in stocks and none in the fixed income savings pool. Fools would put funds in the savings pool only if you thought you would need them in the next 3 to 5 years.

Best of luck to you.

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Author: OldToad One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14146 of 75793
Subject: Re: Retirement through Mutual Funds... Date: 9/30/1999 10:00 AM
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Mishushina: In part yous asked ...My question, should I reduce the amount I send to the mutual fund until the price drops, or should I just leave it be?...but with the mutual fund so high right now, I'm wondering if I'm investing Foolishly now? Is my money working best for me?

My $0.02:

Although mutual funds are made up of individual stocks, you should not look or think of them the same way you would think of a single stock. Hopefully, the fund manager is doing his/her job and buying and selling stocks/bonds to maximize return to the shareholders. The fact that a mutual fund is up, that is, higher today than it was a while ago, has nothing to do with the market sentiment that drives single stocks. It does mean that someone is managing the fund well and getting a good return on the invested dollar. A mutual fund will not go down because the public becomes disenchanted with the fund. It will go down if the stocks in which the fund is invested go down on average. If the fund manager does his/her job really well, the fund will never go down, and will only rise in value. The likelyhood of that happening is small (never going down, even a little bit), but over the long-term that is why you are investing in mutual funds. No matter how much it costs for a single share of a fund, the return on investment will be the same. (If you expect a 20% return from a fund at $10/share, you should expect that in one year, a single share will cost $12, and if it costs $100/share now, it will cost $120 a share in a year. With funds, it is all relative.)

Hope this helped, ask again if you have more questions.

OldToad

PS. It is getting to be close to the end of the calendar year. Mutual funds still have to pass capital gains and dividends on to their investors. Be careful that you don't put money into your funds just before they declare dividends. You'll get some of your money back, and get the opportunity to pay taxes on it also.

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