Transcripts

"Of Mutual Interest"- John Waggoner, Mutual Fund Columnist at "USA Today"

SUSIE GHARIB: In tonight's "Of Mutual Interest," surveying the ruins of your portfolio. Here's John Waggoner, mutual fund columnist at "USA Today."

JOHN WAGGONER, MUTUAL FUND COLUMNIST, USA TODAY: For investors, 2008 will be a year to remember, kind of like that year you spent in traction. As you survey the wreckage of your portfolio, your first inclination is to sell all your mutual fund shares and use the proceeds to stuff your mattress, a very, very thin mattress. But don't sell everything. Just sell the funds that really, really deserve it. In a year with so much fiscal carnage, it's hard to know where to start. Consider this: the average diversified U.S. stock fund is down 40 percent this year. But as you survey the ruins, start by looking at the funds that have fared best against other, similar funds. By that standard, any large company growth fund that has lost less than 43 percent is doing all right. Now ask yourself, what on earth was I thinking when I bought these funds? Some funds, particularly specialty funds, seem like a good idea at the time, but they're really not. The booms just aren't worth the busts. Consider emerging markets funds, which soared last year on booming economies in Brazil, Russia, India and China. They're down an average 58 percent this year. To get back even, you'll need to earn 140 percent. If you own a specialty fund and don't remember why you do, sell it. It's probably not worth the heartache and it probably won't come roaring back any time soon. The other reason to sell: If you set an allocation for stocks in your portfolio, it's time to sell some money funds and bond funds and get back up to your target allocation. It will be as painful as your year in traction, but you'll be selling bonds high and buying stocks low and that might speed your recovery. I'm John Waggoner.