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I recently received two questions with a similar theme:
My 403 b is losing money. i am putting in the max. amount right now w/ employer matching. am i better off leaving this alone or should i not put in the minimum and put the rest in cd’s? does the match make up more than the loss incurred by the deprived economy? it is time to recommit for next years benefits and i ‘m not sure the best route to take. thanks!
- Joel
My question has to do with 401k employer plans. With the current financial crisis the balance continues to drop. Some have taken the money out ‘for the time being’ until things calm down, others are riding out the storm. If the worst occurs, and your balance goes to $0 ‘on paper’ , do you still own the ‘stock’ that the funds were invested in? And do you just wait and hope the ‘value’ of the stocks come back and grow in value again? Or would it be wise to take the money out and then re-invest at a later date when markets calm down? I am 50 years old and have only been in my current employers 401K for 2 years.
- Paul

Current economic conditions have dealt many, if not all, Americans serious losses in their investment portfolios. While Paul is correct in saying that much of these losses are only “on paper,” this is of little consolation to investors who are nearing or in retirement. The key considerations here are risk tolerance and investment expectations. Are you the type of person who wants huge returns and are willing to stomach the risk associated with that type of investment? Are you someone who wants to see smaller, but more predictable gains – following the slow and steady wins the race mindset? Are you somewhere in the middle of these two categories?
At Members Credit Union, we partner with MEMBERS Financial Services to provide investment services and advice to our members. I encourage all of you to give Richard Davis a call at 800-951-8000, x111. He would be more than happy to help you evaluate your own risk tolerance, and guide you through the investment process.
One investment that I absolutely know is wise is the employer match portion of your 403(b) or 401(k) plan. Even if you are totally adverse to risk, there are typically investments under these plans that are safe, fixed income options to offset your fears. Regardless of their actual returns, an employer match is a 100% investment right out of the box. It typically pretty wise to at least put enough aside in these plans to take advantage of the employer match.
Certificate investments are always a good idea because they provide a fixed return over a set period of time. While this is a conservative option, certificates (especially those at Members Credit Union) can provide a very high return. For this reason many people choose to make certificate investments a prominent part of their portfolios. Your personal investment style should dictate what percentage of your investment activity should be allocated to this kind of option.
Lastly, to address the individual stock question, I want to point out what mutual funds are and what they are not. Mutual funds managers invest in individual stocks, bonds, and other investments to create as predictable of an investment option possible. The percentage each of these funds allocates to various investment vehicles dictates the risk levels of these investments. A good manager diversifies these funds in such a manner that if a portion of the funds’ investments lose money, there are other investments within those funds that offset or counteract those declines. So, even if a fund invests in a stock (to follow Paul’s example) whose value drops to zero, the likelihood of the entire fund dropping to zero is almost 0%.
The key is to not panic – as hard as that may be. I don’t know what will happen with the market. Anyone who tells you that they do is lying. What I do know is that panic makes people sell low and buy high. That is the opposite of what conventional wisdom dictates.
Thank you for your questions, and make sure you call Richard Davis at MEMBERS Financial Services for a free consultation – another free service brought to you by your friends at Members Credit Union.

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