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Nervous in Oklahoma
Old 10-11-2020, 12:12 PM   #1
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Nervous in Oklahoma

59/58 DW with cancer 1M in IRA's and 401K 60/40 mix as of now. Considering moving 100% to Fidelity Money Market Mutual Funds until after the elections but know absolutely nothing about them. I have FNSXX available in my 401K I assume for a reason. Comparing it with Fido's 100 other offerings reveals not much difference. Why would one diversify with MMMF's when they are all within 0.5% in performance and all within limits on expenses? Do I have less risk diversifying between 3 or 6 different funds? I just do not understand the variety. I get floating vs steady NAV but find little reason to diversify. Anybody here that can offer any insight. I do plan to call Fido tomorrow but have always valued the education I receive here.

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Old 10-11-2020, 12:31 PM   #2
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Obviously higher yield (not as a result of lower expenses) is going to entail higher risk. However, with the money market funds, the higher level of risk is relative to the types of securities generally held in money market funds. At the very lowest risk you are going to have US treasury securities. As you get more risky, they get in to corporate commercial paper. Yes, there is more risk compared to treasury securities. However, they are still ultra-low risk on the totem pole of securities.

Personally, when the Fidelity fund options for cash dropped down below 0.1% (now at 0.01% = 10 cents/$1000/year) I moved everything to FCASH - at these levels, there's no reason to take any risk in my view.

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Do I have less risk diversifying between 3 or 6 different fund
No, I do not believe you will get any benefit. There will be extremely significant overlap.
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Old 10-11-2020, 12:50 PM   #3
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I'm not sure what your investment time horizon is or your required cash flow needs are from your portfolio, but from an "investment" standpoint committing to 100% cash because of the election is a recipe for disaster.
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Old 10-11-2020, 12:59 PM   #4
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I'm not sure what your investment time horizon is or your required cash flow needs are from your portfolio, but from an "investment" standpoint committing to 100% cash because of the election is a recipe for disaster.
Good point. For instance if I had a functioning crystal ball and could tell you (today) the outcome of EVERY political race, you still wouldn't know what to do, right? YMMV
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Old 10-11-2020, 01:11 PM   #5
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+1.... even if one's guesses as to who will win the presidency, who will control the House and the Senate were all spot on there are too many variables to know the future implications on the stock and bond markets.... there are way too many important variables in addition to who controls politics.

Not trying to be polictical at all, just factual... I recall a Forbes article which stated: There is no conclusive evidence suggesting the president’s party has any statistically significant impact on U.S. equity market returns (see Campbell and Li 2004). Intuitively this makes sense, because stock returns are influenced by a myriad of factors such as valuations, corporate profits, business cycles, monetary policy, etc. In addition, the increasingly global economy (the S&P 500 generates more than 50% of revenues outside the U.S.) makes the actions of a single government less important." I agree with that thought.

https://www.forbes.com/sites/peterla.../#b7e1426239df

Actually, I found this site to be fun: https://www.macrotrends.net/2481/sto...e-by-president

But if OP does go to cash he probably has a 50% chance of being right and a 50% chance of being wrong.
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Old 10-11-2020, 01:11 PM   #6
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When I said 100% I wasn't clear. I do have significant cash savings outside of our IRA's and 401K. I am just wanting to avoid the possible turmoil that could come with the election and believe that moving to MMMF's from mid October to mid November won't cut me out of too much potential gain but could protect me from large losses. I will be needing access to part of that money within a year or so to protect my cash. Besides my reasoning for doing so I was really needing clarification on MMMF diversity. IMHO the pot is brewing!

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Old 10-11-2020, 01:13 PM   #7
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Given how close we are to the election, it's probably already baked in.
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Old 10-11-2020, 01:23 PM   #8
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Sounds more like market timing than a worry of a quick market loss and long market recovery. IF you think there's a significant chance that the market will fall fast and hard between now and Thanksgiving, say, with a subsequent slow recovery that would take years, then MAYBE. But, since you already have significant cash, the risk is greater pulling it out now than just letting it recover because who will know when to buy back in?

In my opinion, you do not have a tolerance for risk when it comes to the market, your IRA or 401K. Not just a high tolerance, I'd say near zero. But hey! I was there with you in 2008. Lost 100's of thousands by pulling out after deciding I couldn't afford to take any more loss and still retire when I wanted. What a mistake that was and will never make again. For every market downturn, it has ALWAYS come back and gotten more return than I ever could have made by early withdraw from the game.
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Old 10-11-2020, 01:24 PM   #9
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I realize the whole world is watching this election but the WHOLE WORLD is watching this one!! Lately it seems the media as opposed to fundamentals has been the driving force. Headlines have been controlling and forcing volatility. IMHO of course.
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Old 10-11-2020, 01:26 PM   #10
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Originally Posted by skipro33 View Post
Sounds more like market timing than a worry of a quick market loss and long market recovery. IF you think there's a significant chance that the market will fall fast and hard between now and Thanksgiving, say, with a subsequent slow recovery that would take years, then MAYBE. But, since you already have significant cash, the risk is greater pulling it out now than just letting it recover because who will know when to buy back in?
My opinion once again. Trump wins; market rises. Harris wins; long slow drop. Wait.........did I say "Harris"?
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Old 10-11-2020, 04:07 PM   #11
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Thanks for the interesting discussion.

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