❗Let's close the gap: We still need your help to raise $40,000 by April 1. Donate now
Ask Money

Should I stick with mutual funds?

Chris Farrell Feb 20, 2009

Question: In 2006 I decided that I would move my (significant) individual mutual fund holdings to a managed account with my investment firm (a major mutual fund company). I did this because I have been busy in the military and have not had time to manage my mutuals and keep track of recent goings on. I am young, so they determined I should take risk. I agreed. Now that whole amount is down 35% from when I put it in. I am 38 years old. What should I do? Chris, Ft. Worth (deployed to Baghdad), TX

Answer: It hurts when our savings decline by that much. You do have a lot of company, however. And your portfolio is probably reasonably well diversified with a tilt toward equities (because of your age). The reason I say that is you would be down a lot more without some bonds holding down your paper losses. (Conservative bond mutual funds with a big dose of government securities did well last year.)

Normally, I am a skeptic about managed funds, but in your case it was a smart move considering all the demands on your time in the military. I would ask myself the same question everyone should address during this market meltdown. Is my portfolio too risky for me? Here’s a safe forecast: There will be other bear markets — probably several — during your lifetime. Are you okay with that? You’re still very young, and you have a long time for the money to compound. That argues for leaving it alone. But if you don’t like the losses, I would direct the managed account to create a more conservative portfolio over time. There’s no rush, but you’ll want to reduce your exposure to equities.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.