How one savvy female built a sweet nest egg
Here's one smart female investor who didn't let the bull or bear market drag her down.
Mary Henry is the kind of mutual fund investor we'd all love to be---not only has she been a long-term investor, but she's got the money to show it.
Henry, who has been in the banking and lending business for most of her career, is what you might call your typical, professional mid-western female. She's married, has children, a husband and a retirement account. What's unusual is, she has an investment mind of her own. And, as a result, instead of a retirement account that's lost 30 to 40 percent of its value over the past couple of years, she has one that's only down 6 percent from its all time high. A high that was reached in 1998 when she decided to take the bulk of the profits her mutual funds had produced during that decade and chuck them into money into money market mutual funds.
"Back then I made a personal decision, that wasn't based on the market, to sell my mutual funds, " says this native from Chicago. "I just thought I was so lucky to have experienced such big gains, that I'd set some (of the profits) aside in cash. Then, no matter what happened to the rest of it, I'd have enough."
So, she took some profits and is all the wealthier today for it.
Henry's story is one that all of us can learn a thing or two from---especially if we're women. Why the emphasis on "women"? Because female investors need special attention: Not only are they likely to live longer than men and earn less than them, the average female born between 1946 and 1964 has a good chance of remaining in the work force until at least age 74 because she doesn't have the funds to retire say data reports from OppenheimerFunds.
Add to that a poverty rate among elderly women that's much higher than it is for elderly men and you can see why it's of particular importance that women make it a point to concentrate on saving money and building a nest egg for their future.
With that in mind, here's more about how Henry built her nest egg.
First, as the old adage goes, it takes money to make money, and Henry got the money to make her fund investments in 1992 as a result of an employer's Employee Stock Option Program (ESOP) she was a participant of. Then, when she changed jobs that year, she rolled the payout money received from her ESOP into another qualified retirement account.
Henry put this money, that she " never expected to have", into a 401 (k) account investing about half of it into two different growth funds; the other half into two balanced funds. And for the next six years, let the money ride ----not touching any of it and reinvesting all dividends and interest income. Then in 1998, after her fund investments had tripled in value, she made a decision.
"I kept getting my statements and it (the money) was growing so phenomenally I just couldn't believe it. And, it just got to the point that I was so pleased to have that much money, which by many people's standards wouldn't be a lot, that I just called up my broker and sold," she explained.
While there were plenty of brokers who told her that she would be missing out on market opportunities, Henry knew that markets have their cycles. She also realized that when you've had the good fortune of making a lot of money in a short period of time, it was important to take some of it off of the table. So, she decided to take 60 percent of her profits and invest them in cash, i.e., money market funds.
Today, with 40 percent of her retirement account monies still invested in mutual funds, she's sitting pretty and stands as a good example of how thinking for yourself can pay off.
Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.
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