Practice Management Toolkit

Frequently Asked Questions (FAQ)

Coping With Today's Stock Market

Q - Given all the market volatility, should I still continue to make monthly contributions to investment accounts or simply put my money in a money market account?

A - Without knowing the particulars of your financial situation, that question is best answered based on your time horizon. If you plan to invest that money for five year (often regarded as a market cycle) or more, it is fair to say that you should continue to dollar-cost-average. But first do an analysis of your present holdings to determine if they are still right for you and your investment objectives.

Remember that the strategy of “dollar-cost-averaging” assumes there will be periods when prices are depressed. Buying shares during these declines enables you to acquire more shares with each dollar you invest. But it is also very important to evaluate what you are purchasing to avoid continued funding of a failed or failing strategy.

Q - The S&P 500 index mutual funds are up this year but negative for the past three years. Why should anyone continue to invest in them?

A - Despite the performance of the S&P 500 index funds over the past three years, these funds have served investors well historically. In fact, the vast majority of large-capitalization (large cap) stock, managed mutual funds have under performed the S&P 500 index. Famed investor Mr. Bill Miller, manager of the Legg Mason Value Trust Fund, is just one of a handful of mutual fund managers who has beaten the S&P 500 for the past 11 years.

There will probably always be a small group of fund managers for all types of mutual funds who outperform the broad indices. The challenge for individual investors is to uncover these funds and then have the fortitude to stay with them year after year even when performance wanes.

If you have concerns about the future performance of S&P 500 index funds, consider mutual funds that mirror broader indexes.

Do you have questions?

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And don’t forget to visit the Crest Learning Center website often to look for updates.

Note: Practitioners who offer a retirement plan through their practice have a fiduciary responsibility to educate their employees about their plan and investment principles. By encouraging your employees to avail themselves of the free information on this website, you will take another step in demonstrating your compliance with Regulation 404(c). This subject of ERISA 404(c) compliance is explained in Series 4 of the Personal Finance CD-ROM and will be covered here at a later date.