Need help. I moved my 401K money out of stocks last Sunday and into bonds. Now I'm still

[williesgirl]

scared that's not enough protection. I can't lose this money. I'm disabled with a disabled daughter. What is the safest route? At this point, I don't care if the money earns a penny this year, just that the principal is safe. If possible, I need to leave the money in my former employer's plan since they pay the fees, not me.

Any suggestions from folks who have a clue about this stuff, which obviously I don't.

[global1]

1. I Moved To CD's....

albeit a low interest rate now - at least it's something. I just don't have confidence in the stock/bond market. Will wait to see what happens in Nov. In the meantime - if traders start jumping out of windows - I'll feel a bit protected.

[williesgirl]

2. My problem is my plan doesn't offer IRA CD's, nor any CD's. If I take one penny out of the plan, I

have to take it all. My former company does this since I'm sure they want us all out of it so they don't have to pay the fees for former employees. I think it sucks but ERISA laws all favor the companies, not employees and it's an ERISA plan.

[seabeyond]

3. i have majority money in cd and hubby just started putting into 401k

especially after enron i just figure all money in 401k at risk. if you have to stck with the 401k i dont know what you are really asking. money stays there

[williesgirl]

4. I don't know how safe a bond market is? Is it just as risky as stocks?

[ThomWV]

7. US Treasure Bonds, not the bonds of private companies

Because as bad as it is those US bonds are still the safest thing you will find.

[Zynx]

24. US Treasuries are exposed to interest rate risk, but that's it.

Also, you won't have to worry about rising interest rates during a recession.

[high density]

9. If it's something you can roll over to an IRA, I would do that

so you have access to the investment options you want.

[A HERETIC I AM]

16. If this 401(K) is through a company she no longer works for, she absolutely can roll it into an IRA

and there is damned little reason not to.

The OP should look into an IRA Rollover from her ex-employers 401(K) to an IRA. IRA's are "custodial" accounts but she can set one up through her small local bank, a major national bank, an on-line brokerage, (Ameritrade, Schwab, Scottrade, etc.) directly with a Mutual Fund company (of which there are hundreds, but this choice usually limits the investment choices to only those funds offered by that fund company) or with a brick and mortar Brokerage firm. (Wachovia Securities, Merrill Lynch, UBS, Raymond James, Morgan Stanley, etc)

Opening an IRA with a brokerage, either an on-line one or brick and mortar, will offer the greatest variety of investment choices. In other words, even though you can open an IRA account at your local bank, they might not offer anything more than high interest savings accounts, CD's and Money Market funds. A Full service Broker-Dealer can offer virtually every investment vehicle available to the public, from CD's to options and futures trading.

[cap]

5. start interviewing financial advisors

and try to find one that knows what they are doing.... talk to a few people before you decide on the best one.

[bemildred]

6. You don't want to be in bonds.

You want money markets or the like, or CDs if you can wait. You can get wiped out in bonds by interest rate changes - if you have to sell - or by bankruptcies of the issuers.

[Zynx]

21. Money market funds invest in essentially ultra-short term bonds.

90-day paper and shorter. You don't have interest rate risk to be sure, but some money market funds are exposed to default risk.

[bemildred]

25. Essentially yes. The very short term is the key.

It allows the "bonds" value to stay (more or less) constant over the term. The value of longer term bonds fluctuates with interest rates, and the change can be large. Rising interest rates can kill you.

There is no such thing as a secure investment in the modern market, even cash can lose a lot of value, and if you go where the returns are, there is a corresponding rise in price risk.

[Zynx]

26. My point is nothing is truly secure. People should relax a little bit or you

will be worried all the time. Even the federal government could conceivably default and then nothing is safe. Also, contrary to popular belief here, gold is not a safe investment.

[high density]

8. I'd recommend short term treasury bonds

If those aren't available in your 401k, look for a stable value fund/money market fund. Many bond funds (especially those labeled "high yield") may have too much exposure to junk bonds at this point and will perform more like equities than you would like.

Just remember that these sort of "safe" investments carry inflation risk, so you will likely be "losing" money over the long term to inflation even if it is not reflected on your statement.

[williesgirl]

10. My plan offers "Vanguard Federal Money Market Fund" It states

Strategy and Policy
Investment strategy

The fund invests primarily in high-quality, short-term money market instruments. At least 80% of the fund’s assets are invested in securities issued by the U.S. government and its agencies and instrumentalities. Although these securities are high-quality, most of the securities held by the fund are neither guaranteed by the United States Treasury nor supported by the full faith and credit of the U.S. government. To be considered high-quality, a security generally must be rated in one of the two highest credit-quality categories for short-term securities by at least two nationally recognized rating services (or by one, if only one rating service has rated the security). The fund will maintain a dollar-weighted average maturity of 90 days or less.


Investment policy

The fund reserves the right to invest in repurchase agreements. These are contracts in which a U.S. commercial bank or securities dealer sells government securities and agrees to repurchase them on a specific date and at a specific price.
The fund reserves the right to invest, to a limited extent, in floating-rate securities, which are traditional types of derivatives.

Vanguard® Federal Money Market Fund seeks to provide current income while maintaining liquidity and a stable share price of $1.



Not sure what all of this means - does it mean my principal won't go down?

[high density]

12. That's a very good fund for what you want

Yes, it means your principle will not go down. The money is not covered by FDIC insurance or anything like that, but if something so bad happens that this fund fails, then FDIC insurance would likely to be worthless as well. It's about the safest place you could find if you are worried about preserving principle.

Full disclosure: I have a large majority of my assets at Vanguard.

[williesgirl]

14. Thank you. I was in Wellington and Windsor until last Sunday. Moved it to

Short-Term Investment-Grade Fund which is where it's sitting right now. My daughter is only 24 and unable to work or go to school. I'm 63, my husband died suddenly 7 years ago, and I'm unable to work and care for her at the same time and in very poor health. It scares me to think what will happen to her if I lose this money or if something happens to me.

So do you think I should move it all to the Federal Money Market Fund ?

[high density]

19. The short term investment grade bond fund carries more risk

And the principle value will fluctuate a bit. For the increased risk, the short term investment grade bond fund will likely have higher long term returns than a money market fund, but that's not guaranteed. If you are very concerned about principle fluctuations then the Federal Money market fund would be better for you.

[bemildred]

15. Ditto that.

Exactly right.

[libnnc]

18. I'm in Vanguard too

my plan offers an Intermediate Term Bond Index Fund. I've got almost half of mine in that right now. I'm wondering if I should put it all in there.

[azygous]

11. Buy gold

and bury it in the backyard. Seriously. If you can't afford the high price of gold, buy silver. It's beating inflation also. Buying precious metals right now is the best insurance against inflation and risky money market funds. They'll earn you more than bonds will, that's for sure. And you will always be able to get your hands on it when you need it. I bought gold about two years ago and have doubled my investment.

[high density]

13. Money market funds aren't risky

The underlying investments in money market funds are of very short term duration. Like 90 days or less. Not all of them are created equal, but the ones at Vanguard are very conservative about what they invest in. I don't think anybody has ever lost a dime in a money market fund, even in the few rare ones which have failed.

Commodity speculation is not what the OP wants. Gold and silver prices are very volatile. Gold bars don't pay interest, either.

[Zynx]

23. Gold goes in fads and isn't riskless. Last big gold run up ended disasterously.

If you bought gold in 1982, you're kicking yourself. Almost everything outperformed it.

[Squatch]

31. Wow. Just wow.

"If you can't afford the high price of gold, buy silver."

:crazy:

[MadHound]

17. Go overseas, seriously

Anything domestic right now has a lot of risk hanging out. Go for overseas, stable companies.

[Zynx]

22. No emerging markets at the moment. They are exposed to the commodities bubble.

That's the next big one to go after stocks in 2000-2002, housing in 2007-2008(the bursting of the bubble, not the run up), and commodities are next. Europe is the only place you should put your money overseas at the moment. Also, the global credit deflation will hit economies like Brazil very hard.

[Fresh_Start]

29. many overseas funds are not performing any better than US right now

the problem of a global economy is that the economies are linked so its unlikely that a substantial hit in the US would not result in problems in overseas investments

[williesgirl]

20. Thanks to all of you for your help and comments. I appreciate them and you.

[MilesColtrane]

27. I recommend a TIPS fund.

Treasury-Inflation Protected Securities, also known as TIPS, are securities whose principal is tied to the Consumer Price Index.

With inflation, the principal increases. With deflation, it decreases. When the security matures, the U.S. Treasury pays the original or adjusted principal, whichever is greater.

I have a little bit in the Vanguard TIPS fund.

https://personal.vanguard.com/us/funds/snapshot?FundId=0119&FundIntExt=INT

My TIPS holdings are part of an IRA so I don't pay taxes on the money it makes.

Historically for the Vanguard TIPS fund the return after taxes is about 6%.

[williesgirl]

28. Thanks, but just checked and TIPS isn't offered in my company's plan. Sounds good though.

[Squatch]

30. I'd recommend NOT listening to anybody giving you investing advice on DU

including me. Anybody who turns to DU, or any anonymous discussion forum, for help on decisions that are going to impact their financial security is a...well, I don't want to call anybody names, but you get the idea.