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Subject:  How to stop the bleeding Date:  10/10/2008  3:22 PM
Author:  EPIM Number:  13 of 21

An idea occured to me today and I need some advice.
I'm 38
A few months ago I got tired of the market volatility and I moved my 401K into a govenment bond fund (FEDBX)
This has in effect sheltered me from most of the down swing we have seen in the last few weeks.

What to do now is my question.
Holding in the bond fund makes me subject to interest rate changes. This in my mind sounds positive but nothing is making sense at the moment.

The idea I had was to borrow half of the money in my account effectively insuring that it will not go down.

I would then be paying myself interest on the loan at between 5 and 6 percent. In theory I could swing that loan into a fixed return 90 day CD or longer gaining me 3 to 4 percent

This would also allow me to potentially buy back into the market with cash sometime in the future.

The 2 to 3 percent spread between the interest I payback to my 401K and the CD return, would have to come out of my cash flow but I don't see that as a loss because I am paying myself back.

If nothing else I will be cost averaging when I swing my new money (both my regular contributions and my bi-weekly loan payments) into buying my regular aggressive growth funds.

Does that make sense to anyone?
What am I missing?


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