MBA 820 Reflections on Module 4

Have you had an experience in buying stocks, bonds, or other investment instruments including mutual funds, retirement plans, 401K, 403B, pension plans, or even government bonds? Reflect on these experiences. Why did you choose one over the other? What information did you use to make your decisions?

I have had experience with stocks, mutual funds, IRAs - traditional and Roth, some bonds (mainly govern savings bonds), and 401Ks - traditional and Roth.

401K offer great retirement benefits since you can put up $15,000 in 2007 and $15,500 in 2008 total. Split it up into traditional and Roth or 100% in one over the other. IRAs exist for me due to transferring 401K and various other retirement instruments into transportable instruments like IRA.

Mutual funds typically are safer than individual stocks, due to the diversification of them and supposedly professionally managed by extremely well paid finance professionals. Unfortunately these managers of mutual funds make their huge sums of money regardless of the performance of the fund. So choosing mutual funds is probably best done by looking at funds with 10yrs or more history and a manager or managers that have been running that fund for that long. New managers do not mean that the fund continue doing well or poorly. I have used mutual funds as savings accounts in the past with great success. A good, stable balanced fund like Fidelity Puritan will earn around 8 to 20% before tax interest and you can get your money transferred to you within 72 hrs - not bad on the liquidity front. Nice thing is that this service can all be done by your local bank, due to the deregulation and consolidations within the market. Allows your checking, business checking, savings, mutual funds, etc all to be with one bank and still have the flexibility to invest in anything you wish.

Govern bonds, etc are OK - I would prefer to just invest in a bond mutual fund if I was going to invest solely in bonds, otherwise a good balanced fund gives you about 30 to 50% exposure to bonds.

The decisions are all based on your personal comfort level for risk and reward. Bottom line is to preserve the principal and have the money grow faster than inflation eats it up. At this time, it appears that inflation with oil etc is probably running 4 to 5% per year, so you need to earn around 8% annual to have your money truly grow.