Q & A

Managing fund investments when the chips are down.

A: Because I don't know anything about your entire personal finance picture, that's a hard call to make. And, a difficult question to answer because there's never a one-size-fits-all answer to personal finance questions. But we can share some ideas. So, let's look at a couple of different scenarios and hopefully one will make sense for you. First, the market.

It wasn't all that long ago that the Dow Jones Industrial Average was trading in the 9000 range. In 1998, for instance, it closed the year at 9226.75. The year before that, 1997, the DJIA ended the year at 7908.25. I mention those numbers only to point out how short our memories can be and to remind us all that trading above the 10,000 mark isn't something the market had been doing for decades---only since March 29,1999.

Today, even though we're in a bear market with a war going on, the best time to invest is when you've got the money and equity prices are low--- not high. So, don't be afraid of the markets today unless a) you'll need your money returned in a short period of time, like within the next couple of years, or b) the recent markets' performances have taught you that you don't like the up and down realities of stock market investing. Investing, after all, isn't for everyone and it's okay not to like it, or, participate in it. There are plenty of millionaires out there who didn't make their money in the market. They did it by other means, like investing in themselves, or real estate, or by creating something.

Having said that, Steve Schoepke, vice president of research and product development at SunAmerica Asset Management is very bullish on the market. "With the economic incentive plans, and the economic stimulus in fiscal and monetary terms about as aggressive as I've seen in my 20 years in the business, when this market turns around, it's going to be super-charged."

Schoepke does add a couple of caveats, however. One is consumer confidence; the other, the treat of terrorism at home here in America. "Those uncertainties make the timing of the market turnaround very difficult, " he says.

So if you believe the pros, and the historical long-term upward trend of the market, like the market and have a time horizon and risk tolerance that warrants it, why not keep investing as usual into your mutual funds.

As for paying off any debts, that's a good idea too. Particularly if those debts carry high interest rates-- like the rates many credit cards do.

Paying off existing debt with new money makes excellent sense under most market conditions and right now is as good a time as any to unburden some of your debt load. Why? For openers, it could be a wiser use of money over the near short-term than investing in the market may be. And secondly, paying off expensive credit card or loan debts brings immediate monetary rewards. And rewards are what investing-- and personal finance/money management-- is all about.

On the other hand, if you're one of the tens of thousands who've lost their jobs because of the September World Trade Center disaster, or, a victim of corporate lay-offs over the past year, tapping in to your mutual fund assets might seem more appealing than investing in them. Before you do that, however, beware: Getting at that money can be costly particularly when tapping qualified retirement accounts, like IRAs or 401(k)s.

Some of the pitfalls include penalties for early withdrawals from qualified retirement accounts, plus, monies taken are considered income in the year in which they're received. That means, make sure to do your homework or talk with a financial planner before redeeming any of those fund assets.

But if you absolutely positively need the money that's in your fund accounts, look first to any mutual funds held in non-qualified accounts like those held in your private portfolio. Redeeming those shares means that you'll be able to take advantage of any losses that may have occurred. And better yet, avoid the extra tax consequences tapping qualified retirement accounts bring.

Bottom line, it's circumstances that dictate every individuals' investment plan. If you're financial picture is such that money isn't an issue and the mutual fund asset allocation plan you've got in place still fits your goals and objectives, most pros would say, stay the course. If that's not the case, do some rearranging.