Friendly Reminder

76winger · Post by **76winger** » Wed Mar 06, 2013 12:50 pm

Ed in Tampa wrote:Dave
Only one thing to consider and that is if something happens to the mutual fund company.
In 2008 my mother in law had a number of mutual funds, one and I don't remember the name went belly up. From what I recall she had to wait until everything was sorted out before she got any of her money. From what I remember from the time she found out the company was in trouble until she got her money it fell like a rock, and then for some legal reason when the market started to recover in 2009 the money in the mutal was locked to just an interest rate income. I think when the all the screaming and shouting was over she had lost about 40-50% of the funds worth before the 2008 collapse. People that knew told her she was lucky because she could have lost it all. It took about a year and half before she began to get any money.

Wasn't old Bernie Madoff running a mutual fund ponzie that caught a lot of people that should have known better?

I think this would bring up the next level of diversification: When your balance starts getting to the point that loosing is would be a life altering event, then it would be time to break up the investments into more than one mutual fund company. Since they're supposed to be federally insured up to (I think) $250,000 that might be a good time to switch part over to another company so the balance at each location is below that insured amount.

dusty · Post by **dusty** » Wed Mar 06, 2013 12:56 pm

76winger wrote:I think this would bring up the next level of diversification: When your balance starts getting to the point that loosing is would be a life altering event, then it would be time to break up the investments into more than one mutual fund company. Since they're supposed to be federally insured up to (I think) $250,000 that might be a good time to switch part over to another company so the balance at each location is below that insured amount.

Isn't this the sort of decision for which one hires a financial manage? Or are we hearing about people who had financial managers who "made more money from themselves" than they made for their clients.

Ed in Tampa · Post by **Ed in Tampa** » Wed Mar 06, 2013 1:01 pm

frank81 wrote:Mutual funds, variable insurance products, etc. are in their own "fund" separate from the company's general fund so as long as everything is done legally your money is safe even if the company goes into receivership. The company has to transfer cash in or out at the close of every single day to cover account balances.

I'm starting to remember and yes you are right and that is exactly what happened. When the company did whatever (bankruptcy/closed/stopped trading) the funds were frozen. That happened to my mother in law at their low point in 2008. She had to sit there and watch the market go up knowing her money was frozen and untouchable. Then about the time the recoverery of 2009 was over she got her money. She was given all that that was in the account when it hit bottom in 2008 minus some funds with various explanations. I think her total lost from the whole mess as 40% or more.
Her other mutual funds experienced the same thing without the companies going out and basically returned to pre 2008 collapse values or increased.

My point is you can lose in mutuals also.

Also you qualified what you said by saying if everything is done legally. That is a rarity in this day and age.

dusty · Post by **dusty** » Wed Mar 06, 2013 1:08 pm

Ed in Tampa wrote: Also you qualified what you said by saying if everything is done legally. That is a rarity in this day and age.

You don't really believe that honesty is a rarity these days, do you. I would buy into a statement that it seems like that sometimes but not that it is. Yes, there may be more dishonest and greedy people than there once was but that may be simply because there is a lot more people than there once was.

tomsalwasser · Post by **tomsalwasser** » Wed Mar 06, 2013 1:32 pm

I just wish interest rates would rise. This QE stuff the feds are doing to stimulate the economy is keeping interest rates artificially low, like zero. If rates would rise I could buy myself a guaranteed lifetime pension (immediate annuity) and live happily ever after.

frank81 · Post by **frank81** » Wed Mar 06, 2013 2:54 pm

76winger wrote:I think this would bring up the next level of diversification: When your balance starts getting to the point that loosing is would be a life altering event, then it would be time to break up the investments into more than one mutual fund company. Since they're supposed to be federally insured up to (I think) $250,000 that might be a good time to switch part over to another company so the balance at each location is below that insured amount.

FDIC only insures demand deposits, like checking and savings. Investments are not insured.

frank81 · Post by **frank81** » Wed Mar 06, 2013 2:58 pm

Ed in Tampa wrote:IAlso you qualified what you said by saying if everything is done legally. That is a rarity in this day and age.

Separate Account transfers are done legally 99.99999999999999% of the time.

Corzine may be the only person to ever have the cajones to break that rule. Before he was governor of NJ, he was the comissioner of Banking and Insurance which means he was in charge of enforcing the rules. Probably the reason he's avoided any real punishment.

dusty · Post by **dusty** » Wed Mar 06, 2013 3:09 pm

frank81 wrote:Separate Account transfers are done legally 99.99999999999999% of the time.

Corzine may be the only person to ever have the cajones to break that rule. Before he was governor of NJ, he was the comissioner of Banking and Insurance which means he was in charge of enforcing the rules. Probably the reason he's avoided any real punishment.

I am not well qualified in financial matters but it seems to me that Corzine's having that extensive background is the very reason why they should have locked him up and lost the keys.

I must conclude that he has influential friends somewhere and that the rules are not applied equally without regard to that influence.

Ed in Tampa · Post by **Ed in Tampa** » Wed Mar 06, 2013 3:56 pm

frank81 wrote:Mutual funds, variable insurance products, etc. are in their own "fund" separate from the company's general fund so as long as everything is done legally your money is safe even if the company goes into receivership. The company has to transfer cash in or out at the close of every single day to cover account balances.

If you had a fixed interest product, you could potentially lose part of your account balance if the company goes under. Fixed and variable are treated very differently.

.

When you say mutual funds are you taking of something like Franklin investment fund or are you talking of an annunity when you say the company must deposit enough money each close of business to cover the account balance? I think some annunities are like this but I don't understand mutual funds that well.

Ed in Tampa · Post by **Ed in Tampa** » Wed Mar 06, 2013 3:58 pm

dusty wrote:You don't really believe that honesty is a rarity these days, do you. I would buy into a statement that it seems like that sometimes but not that it is. Yes, there may be more dishonest and greedy people than there once was but that may be simply because there is a lot more people than there once was.

Dusty you are right that was a over generalization and I agree with you most people are honest. It just seems like I keep finding the dishonest ones.