How does the stock market work?
A. Compare your retirement account, the S&P 500 Index and the economy and you will see they follow each other every year.
B. The mutual funds in your retirement account have the stocks of companies that are in the S&P 500 Index which is the leading stock market indicator.
C. The S&P 500 Index consist of 500 of the biggest companies in the world.
D. All these companies rise and fall depending on their earnings which is a reflection of our economy.
How come Mutual Fund Managers do not sell bad funds?
Mutual Fund Managers of retirement accounts will not do this because they make their money off higher annual fees in the stock funds that control the stock market. For their purpose, they have to keep your money in these funds even if it has a negative rate of return.
The mutual fund companies would not make money if they were to switch funds every time the economy went in to a recession. Low risk funds such as money market and bond funds are charged less compared to Stock Funds because there are no companies to manage.
What if my funds are below the 1 year average?
Two options:
A. Wait and see, which could take years and make no gains while waiting.
B. Switch to a money market fund, government security fund or bond fund to minimize future losses. If you need help figuring out which funds are low risk, then email the names of these funds and we will research them.
How do I know which rising funds to have in my account?
The term used is "follow the leader" and that means pick the funds that are performing as good or better than the S&P 500 Index. On your retirement account website compare the chart of the S&P 500 Index and the chart of your funds to see how they are performing over the last 6 and 12 months.
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