Taking The Bite Out Of The Bear

The stock market has been on a roller-coaster ride, and much of it lately has been downhill. The last quarter's financial statement you received may have reflected the "bear" in the market. So, if your money is in a 401K and you're seeing some losses, what do you do?

CBS "This Morning" Money Editors Ken and Daria Dolan have some advice.

• First, if you're young and you can stay the course, you may want to go from aggressive growth to an equity income fund or a utility fund where you can stay on the sidelines and be more conservative.
• If you're in your mid-50s and you're contemplating retirement, you may consider going to the sidelines in something called a GIC (guaranteed investment certificate). The principal is not touched. It is guaranteed, like a CD.

  Managing Your Money

• If you are uncomfortable with the ups and downs of this market and you want to get out, don't sell everything in a lump sum. Don't tell your benefits office to get you out of there completely. Try to do it systemically in small increments, little by little, preferably on a day when the market goes up. Then, let your fund know you want 'X' number of dollars taken out at that point. Or you can sell the original investment that went in; just leave the profits in there to see what happens, if you're not quite certain you want to be 100 percent out.
• Consider selling your original investment on a day the stock market is doing well and leave in the fund any profits you've made.

Just because your mutual funds are down does not mean that you don't have to worry about capital gains tax. Your mutual fund may be down, but there may be capital gains tax to pay because they may have sold and bought a stock that went up in the portfolio. So you still get the capital gains, but you also get the losses in the underlying value of the portfolio: a double whammy.

• The only way to avoid a capital gain in a mutual fund is to sell the fund shares before they pay the capital gain. How do you find out when they're going to do that? Call the mutual fund company or the broker who sold it to you; capital gains distributions generally are paid in the month of December, but can be as early as in November. Call them and say, "When is this stuff going to get paid, because I want to get out?"

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