With financial giants failing like Lehman Brothers and AIG, investors have been worried about their investments in mutual funds. Mellody Hobson, a financial contributor from “Good Morning America” explained whether investors should be having sleepless nights or if the current economic crisis is just a bump in the road.
Is your mutual fund in trouble?
Below is a synopsis on how Hobson says you can check on your mutual fund:
· Call your fund company's call center and ask if your fund is currently investing in any of the companies that are in the headlines — like Lehman Brothers and AIG.
Also, ask the representative about the fund's quality controls.
· Be weary of money market funds with an expected return of more than 2 percent. The higher the return, the higher the risks.
· Choose money market funds for quality not promises of a higher yield. If a fund is advertising a higher yield it’s best to stay away.
Should I be panicking? Will this happen to other mutual funds?
Hobson says no. She stated that the situations with institutions like Lehman Brothers are atypical in the market and that since the first money market funds were created, there has been only one case where a fund fell below a dollar.
Hobson also stated that her sources say that there is no need to worry about the funds as only a limited amount owned Lehman Brothers and the parent companies are covering the investments.
Finally, she went on to say that money market funds are secure because the industry is one of the most regulated in the country and that the benefits of investing outweigh the risks.
Read this article at: http://abcnews.go.com/GMA/Consumer/story?id=5824937&page=1
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