George Cones, JD's Answers and Guides

here are several possibilities in this scenario. Consider seeing an attorney and/or a tax adviser soon. Before you meet with them, be sure you get the following documents.

-the will if there is one,

-the Plan Summary Description for the 401(k) plan as well as any documentation the 401(k) plan administrator will provide (including the documents which list the beneficiaries for the 401(k).

-get many certified copies of the death certificate, you will find you need these every time you turn around,

-divorce decrees or other papers that would effect inheritance rights,

An attorney can help secure the "Letters Testamentary" or "Letters of Administration" which may be required depending on the complexity of your brother's estate and the laws of your state. Your parent likely had a beneficiary for his 401(k). If the beneficiary is his wife she could roll it into a spousal IRA or Beneficiary IRA. If the beneficiary is someone else or his wife and someone else, than they could roll out their portions into Spousal and/or Beneficiary IRAs. Please consult a tax adviser prior to making any decisions concerning the distribution of the property, as a misstep could cost the beneficiaries unnecessarily.

Thomas, while we empathize with your situation, we don't have much to go on here:

Are you ineligible for social security due to age or non-participation, or are you talking about social security disability?

Are you covered by a defined benefit pension plan and/or a 401k plan?

Without more information, this is a shot in the dark.

Let's assume you are talking about a 401(k) plan, where you have a vested benefit. If you are 59 1/2, you should be able to get a distribution, or a set up rollover IRA. On the distributions (the money you take out and don't rollover) you will have to pay taxes as ordinary income. If you take a distribution and you are under 59 1/2, you may have to pay ordinary income taxes and a 10% early withdrawal penalty. Your plan may have a hardship withdrawal, if you meet the criteria. Any decision you make will have some tax consequences.

You need to get a copy of your Summary Plan Description and talk with your plan administrator about your situation. A rollover IRA account at a low cost provider (like Vanguard) may allow you to withdraw assets as you need them. Please, seek advice from a tax advisor.

Savita, Your question about long and short positions is timely, because today you will find many investments, even mutual funds, that have long-short positions. Many of these investments are managed by very experienced and capable managers, but understand that even in the most capable hands, these long-short positions have risks.

Most investors are familiar with long positions. We buy a stock or a mutual fund and watch it to go up (or down). This is a long position. If we buy the stock or mutual fund for $50 the stock may go up or down. Worst case scenario, the company goes bankrupt, the stock goes to zero, and we lose or $50 investment.

Short positions, on the other hand are less familiar to most investors. When we sell a stock short, we are selling a stock that we don’t own. If we sell a stock for $50 and the stock goes to zero, we can make $50 (we are omitting some of the market rules and additional costs relative to short selling for purposes of illustration). If the stock goes up, say to $200, we can lose $200, because at some point we will be required to buy the stock for delivery to the purchaser. As you can see, the risk of loss as a short position, unlike a long position – which is 100% of our investment) is theoretically unlimited.

To illustrate the concept of net positions (your original question – which you probably never thought I would get to), lets construct a 130/30 portfolio, that is a portfolio that is 130% long, and 30% short. How is that possible? We have $10,000 to invest. We sell short a stock or basket of stocks worth $3,000. Now we have $13,000 ($10,000 our original amount and $3,000 from our short sale). We by a stock, or basket of stocks in the normal way in the amount of $13,000 Long. So, for our $10,000 original investment, we have a portfolio that is 130% long ($13,000) and 30% short ($3,000). Many salespeople for funds that have such a portfolio would tell you have a net 100% portfolio. That is true.

But here is the rub, and this is what you are not often told (except in the bowels of the Prospectus), this kind of portfolio has 160% exposure. If we buy a stock long we (or the fund manager) are betting the stock will go up. If we sell a stock or basket of stocks short, in essence we (or the fund manager) are betting the stock will go down. If we are right we make money of both bets. If the stock we bought long go down and the stocks we sold short go up? If we are wrong on both bets we can lose serious amounts of money, much more than a dull, stodgy long position.

We would call this a form of leverage, and there are all sorts of ways to create hedges or increase risk, such as: individual securities, ETFs, mutual funds, futures, options, or forward contracts (to name a few).

When investing in commodities, especially precious metals, be very careful. Commodities, if one is not in the relavant business (agriculture, mining, energy, etc.), are pure speculation. Many of the wild claims you hear about gold, for example, would not be possible if the market was regulated like the securities market.

Did you know that if you bought gold near its recent high of about $1,800 oz, as of today you would have lost about 15%, and you could lose a lot more. You could make money as well, but gold has only returned in the low single digits if you held it over the last several decades.

Physical gold presents a number of challenges, such as storage and a liquid market (unless you are a jeweler). The same holds true for other commodities. You may want to consider an active manager who buys stocks in commodity driven companies, like mining and precious metals mutual funds (Vanguard has a couple). At least a lot of these companies pay dividends. Besides not paying dividends, physical metals don't procreate, so you aren't going to have any more of the metal than when you started.

An investment in a fund or ETF that uses derivities to leverage its positions could cost you dearly (or make you a lot of money). Risk is a two way street. For those of us who have been around the block, the average investor who invests in a provervial gold mine often winds up with the shaft.

Hana,

Redemption fees are there to prevent market timing. The redemption fees are often 30-60 days, but some are up to a year.

Contingent Deferred Sales Charges (CDSC) are usually there to be sure the mutual fund company recoups the commission paid to the broker. For class C shares the CDSC is often 1% if you sell the mutual fund prior to the CDSC period (let's say 1 year). Class B shares usually have a much longer CDSC period. On B shares, the broker can be paid a commission of up to 8%, but is usually paid in the 3-6% range.

The broker also receives a 12(b)(1) fee on an annual basis, in addition to front-end and back-end loads.

For a discussion of mutual fund share classes, see the guide:

http://www.brightscope.com/financial-planning/advice/guide/2768/How-Different-Mutual-Fund-Share-Classes-Affect-Your-Retirment-Plan-Or-Investment-Portfolio/

Cost clearly affects returns, so consider having a consultation with a fee-only advisor, who may help direct you to institutional mutual funds or Exchange Traded Funds (ETFs).

Armando,

Co-ops are a unique ownership structure, most prevalent in NY. With a Condominium form of ownership you own everything within the walls. You and your co-owners share the common areas and pay for amenities and maitainance. With a co-op structure, you own a portion of the co-op entity (like stock in a corporation), usually based on your square footage.

One thing that differentiates a co-op from a condo is the ability to keep folks out. With a condo, you sell the property yourself, and there is no board process (at least there was not a few years ago). On the other hand, a co-op board can keep you out of the building for all sorts of reasons, and take some time to approve you. You have to be approved.

Many co-ops used to prohibit financing on a large portion of the purchase price, so the purchaser had to pay 25% to 50% of the purchase price in cash. It is my recollection that some buildings in New York City were 100% cash buildings.

You should talk with a good real estate lawyer prior to making any purchases. The New York real estate market is very unique in many ways.

Keenan,

You may want to consider index funds at Vaguard instead. You can purchase the funds in small amounts on an ongoing basis, and have the dividends reinvested. The issue with investing in a dividend reinvestment program is the risk you have in owing one, two, or ten stocks (many of which may have the same return characteristics).

As an example, I am not sure if GM had a dividend reinvestment program, prior to its restructuring, but if they did, and you would have invested there, you may have lost almost everthing. With index funds you can invest in hundreds (the S&P 500) or thousands (the Russell 1000, Russell 2000, or Russell 3000) of stocks thereby gaining diversity that you would not have in just a few stocks.
You can futher diversify by investing in international stock indices.

All of these indices pay dividends too.

As your asset base grows you may want to consider using Index Exchage Traded Funds (ETFs). Vanguard has low cost brokerage accounts. Below is a link to a good article that explains ETFs as compared to mutual funds.

http://news.morningstar.com/articlenet/article.aspx?id=558822&pgid=rss