Jonathan N. Castle, CFP®, ChFC®

Hello Willis, I cannot agree more with the previous poster. In an efficient market (and our markets are very efficient)- ALL data - ALL known and imagined information and outcomes - and the probabilities thereof - are very, very quickly priced into the market. A good example right now would be Apple. Apple stock is currently trading at $619 per share. Do YOU (or I, for that matter) know something about Apple that the thousands of analysts who follow apple - and the hundreds of thousands of individual investors, mutual funds, institituions, hedge funds, and day traders DONT know? Can you (or I) say with reasonable certainty that based upon OUR analysis of the exact same information that every other analyst and investor in the entire world has - that WE and WE ALONE can identify that Apple is currently mispriced in the market and should be worth more (or less than) how the market has currently priced it? Have you or I thought of a possible outcome for Apple that no one else has thought of? Doubtful. That is why the Nasdaq 100 ETF (ticker QQQ) is made up of about 16% Apple Stock - the market has already overweighted this stock's value within the market itself - and will continue to overweight (or underweight) it as new, and previously unknowable and unimaginable information is revealed over time.

Given that virtually every analysis method is absorbed into the market rapidly... consistently identifying companies that will outperform is very difficult. Can it be done? Oh, yes - absolutely it can be done and it has been done many thousands of times over. However - very few individuals can do it consistently, and efficiently, over a long period of time. Those that do usually are the ones that have dedicated their lives to it; it is their profession, passion, and hallmark.

So - if you are pursuing a different career; I would suggest that you maybe DO pick a few high conviction stocks here and there using an analysis method you are comfortable with (such as the Dividend Discount Model; you can google it and find it in Wikipedia) in a small, separate account just to scratch that itch - but the VAST majority of your retirement and life savings be done using a far more reliable and proven method such as strategic asset allocation with perhaps a tactical sector rotation overlay for a small (like 10-20%) portion of your portfolio.

I do think that you are right on the mark with being able to identify which sectors are likely to outperform or underperform during certain elements of the business cycle. While certainly not a perfect science - most of these sectors and asset classes to behave reasonably predictibly. So - in that case - overweighting or underweighting your portfolio at certain times in the cycle - or based upon news - may not be a bad idea, as long as it is done sparingly (probably not more than a couple of times per year since the economy doesn't really move that quickly).

But again - the real likelihood of you generating "excess Alpha" (market outperformance WITHOUT incurring additional risk) above and beyond what can be done professionally is virtually nil. And unless you are willing to dedicate literally hundreds of hours of study, and spend a good bit of money on professional analysis tools - the odds of you underperforming, over the long term - a simple, low cost asset allocation strategy using index fund or ETF's is virtually guaranteed.

Hello Venkat,

The critical component of this equation will be, "How old is your wife?"

If your wife is age 59 and 1/2, then she can access the funds in her 401(k) - to roll them to an IRA (not a taxable transaction), or to use them for any other purpose (probably a taxable transaction) IF your employer plan allows in-service withdrawals. The plan is not required to do so, but most plans do have this provision in the plan document.

The quickest way to find out this information is usually by referencing the Summary Plan Document (SPD). Many employer plan websites have this available for download. If not, then the HR department (or plan administrator in a small busines) will be able to provide it. It is required to be available for all employees.

As to your question about the money market fund - all plans are required to have more investment options than just a money market fund. The minimum number of investment options for a plan to have - and still be qualified under ERISA - is 3 (cash, stocks, bonds). However, most plans offer at least 5 options, with the average number being 8-13 options. Some offer many more. So - if the issue is merely the fact that the money is invested in a money market - then just move money to other investment options. You might consult with a fee-only financial advisor to optimize the portfolio within the available choices within the plan, or see if your plan has an asset management service within the plan that will manage the portfolio for you for a small fee.

Can I move the money market? Virtually all plans distribute the holdings in cash if you execute a rollover. Rarely there will be the option to move the actual investment "in kind" from the 401(k) to an IRA. I have seen it a few times, but this is generally rare.

So - in summary:

1) Yes - MAYBE she can move it if she is 50 1/2 or older. Get the SPD. 2) Check out the other investment options in the plan before you do it - it is possible just moving the money around will serve your purpose.

Personally, I'd keep the money IN a 401(k) versus an IRA if:

1) I was under age 55, AND 2) The investment options were adequate, AND 3) The plan was not unduly expensive with plan fees.

The reason behind my logic is that once you are age 55 - IF you are no longer working for THAT employer - you can withdraw funds from THAT 401(k) with no penalty. However, if you roll those funds into an IRA, then penalty-free withdrawals are not available until age 59 1/2. So, an old 401(k) can serve as an emergency source of funds between ages 55 and 59 1/2 in the event that life events don't play out as expected.

Jon Castle http://www.WealthGuards.com

Caroline,

Typically, money market mutual funds or money market savings accounts will pay a slightly higher rate of interest than a standard savings account, so that is an advantage of using a money market mutual fund or money market savings account over a standard savings account.

However, typically, Money Market mutual funds are not FDIC insured. They are considered to be very slightly higher risk than savings accounts, but not by much. On very, very rare occasions during extreme financial crisis (such as 2008), investors in money market funds may see their accounts "fluctuate" a little bit, and the possibility to lose principal does exist. However, this is quite rare.

So, without going into the details of how different money market funds are constructed, personally, I would use a money market from a large, well known firm such as Vanguard or Fidelity to save for something 16 months away.

Good luck and congratulations on your upcoming nuptials!!

Jon Castle http://www.WealthGuards.com