401k FAQ's


For Delta People By Delta People

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(Frequently Asked Questions)                                         


The Terms Value, Growth and Blend, What Are They...?

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What Do They Mean By Large, Mid and Small-Cap Funds...?

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Why Do You Only Charge $18 A Year...? 

If I Change Funds, Won't I Lose Money...?

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Why Don't You Guys Just Tell Me Which Funds To Invest In...?

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Should I Look Over Fed's Funds Every Week...?

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What Is Your Strategy?
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Do I Have To Wait Till 59 1/2...?
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FAQ Answers:

The Terms Value, Growth and Blend, What Are They ...?

Q.  Fidelity, Morningstar and Fed's Funds All Use The Terms Value, Growth and Blend To Describe Fund Management Style.  What Are They Talking About?

A. When it comes to investment style or strategy there are generally two different types, Value and Growth.  Blended approaches tend to borrow strategies from both styles.

Value:  This approach seeks to buy stocks in companies that the Value Fund Manager deems to be under-priced, thus possessing a greater earnings potential than the market is actually giving them credit for.  One typical example would be, problem plagued corporations that appear to be excellent turnaround candidates.  Companies who for different reasons are going through temporary financial downturns would also be favored by Value Fund Managers.  While searching for such "bargain" stocks, these fund managers often gravitate toward the less sensational and less popular sectors such as industrials, financials and utilities.

Since Value Managers generally focus on "buying low", with hopes of, "selling high" the inherent downside risk of Value Funds is much lower than that of the more pricey and volatile Growth Funds.

Growth:  Managers using this approach usually seek to buy their stock in sectors with fast growing companies. The strategy here is to cash in on the momentum of these popular and often expensive stocks.  Growth Fund Managers tend to search for corporations that they believe will meet or exceed certain growth targets.  For example, some of these mangers will not even consider buying a particular stock unless they are convinced that the company's earnings will grow by at least 20% per year for the next 3 years.  Strong earnings like these are most commonly found in sectors such as technology and pharmaceuticals.

Because Growth Fund Managers usually buy these popular stocks at high prices (in hopes that they'll go even higher) their downside risk is often considerable. At the same time, because these stocks are sometimes very much in demand, the upside potential is definitely worth considering, especially for the aggressive investor.

Blend:  There is quite a gap between the Growth and the Value approaches, this gap is filled with an array of styles that Blend the strategies from both the Value and Growth philosophies of investing. 

 Yahoo Finance > Education Center
 Growth and Value Funds Explained
 Should You Invest In Growth or Value?
  By Emily Hall

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What Do They Mean by Large, Mid and Small-Cap Funds...?

Q.  What Do They Mean By Large, Mid and Small-Cap Mutual Funds?

A. Stock Mutual Funds Are Often Categorized By The Size (Market Value$) Of The Companies They Invest In.  "Cap" is short for Capitalization which refers to the company's current total value on the stock market.

 LARGE - CAP Funds:

  • Invest in established companies with market values of over $8 Billion.

  • Are generally more stable with less inherent risk than Small - Caps.

  • Often yield smaller returns than fast growing Small - Caps.

MID - CAP Funds:

  • Invest in companies with market values between $1 Billion and $8 Billion.

  • Their stocks often exhibit some of the growth characteristics of Small - Caps and some of the stability of Large - Caps.

SMALL - CAP Funds:

  • Invest in companies with market values between $250 Million and $1 Billion.

  • Generally are higher risk with potential for higher returns or higher losses.

  • Are often very attractive to Aggressive Growth Investors.

MICRO - CAP Funds:

  • Invest in companies with market values below $250 Million.

  • High risk with high growth potential.

  • Many of these companies are start-ups, take-over candidates or companies poised to enter new markets.

Source: Yahoo Finance > Education Center - Large-Cap and Small-Cap Funds Defined

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Why Do You Only Charge $18 A Year...?

Q.  Other places charge hundreds of dollars for 401k financial help, why is Fed's Funds priced so low?


A.  At Fed's Funds we do not rely on our product to make a living.  Fed's Funds is our hobby that we have shared with our coworkers since 1998.  But we do rely on our product to help us build a strong and secure retirement with our Delta 401k.  So we have a strong personal interest here, unlike other financial organizations who are securing their retirement through other means.


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If I Change Funds, Won't I Lose Money...?

Q.  The funds I'm in now have taken a beating!  If I change my funds now won't I lose all that money?


A.  That is a common misconception.  Sports teams often change their Coaching and Management staff to get better performance from their Teams.  Trading up to a better performing fund simply changes the staff that is managing your money.  Your money is still in the market and thus still "in the game" to recover those losses.  Trading up to a better performing fund will simply allow your money to grow at a faster rate from that day forward.  The only thing that you really lose by trading up is the Underperforming Management that was handling your hard earned money.


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Why Don't You Guys Tell Me Which Funds To Invest In...?

Q.  Why don't you guys just tell me which funds to invest in?


A.  Here at Fed's Funds we are Not Investor Advisors or Financial Planners and therefore not legally qualified to make specific fund recommendations.  But we Are very interested, seasoned and informed Investors who realize that our financial future is, more than ever, tied to the performance of our 401k(s).


One of our biggest concerns is for our fellow Employees who are putting off responsible management of their 401k money.  Many will consequently forgo much of the early, comfortable and healthy years of their retirement.  No one is more personally affected by a 401k's performance than the Employee who funds the account and supervises it's management.


We feel that your place is to responsibly manage your money while our place is to support, encourage and enable you to conveniently and intelligently administer this important part of your retirement income.


Your 401k is actually a small business designed to fund your retirement.  Making good, simple business decisions is what successful 401k investing is all about.


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Should I Look Over Fed's Funds Every Week...?

Q.  Should I go over my Fed's Funds spreadsheet Every Week?


A.  Fed's Funds offers relevant performance information in many convenient formats for virtually all investing styles, weekly, quarterly and annual.  The more aggressive your investing style the more we believe you should keep in touch with your 401k performance.  We also encourage Investors to maintain their 401k much like they would maintain their other major investments (home, car, etc).


By consistently investing a little time and effort now, you'll enjoy the rewards of an earlier and more comfortable retirement in the years ahead. It's The Consistency That Counts!


Stay Connected To Your 401k!   It's Your Future Income!!


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What Is Your Strategy...?

Q. As 401k Investors, what strategy or game plan do you guys at Fed's Funds use and how often do you change funds?


A. In contrast to the "Buy-Hold and Forget About It" method, we use a Simple, Consistent, Good-Sense technique.  To us, it makes good sense to diversify (a blend of Large Cap Funds, Mid-Caps, Smalls, and Internationals) then stay invested in those funds that are Meeting or Beating their respective index.


By moving out of consistent Under Performers and Trading Up to the Better Performing Funds, we keep our retirement portfolio as healthy and productive as possible. 

We are not trying finish the 401k "race" in first place.  That would require taking too many "gutsy", "hit or miss" market-timing risks with our serious retirement money.

Our goal is to consistently finish well by Keeping In Touch, and minimize our risk by Carefully Trading-Up to strong, healthy performing funds.  It's that simple.

As for how often we trade up to healthier funds, on the average we may change 1 to 3 funds per quarter or sometimes not at all for several quarters.  It all depends on how and if market conditions change.


Do I Have To Wait Till 59 1/2 ...?

Q.  Do I Have To Wait Until I'm 59 and 1/2 in order to make withdrawals from my 401k or IRA and avoid the tax penalty?


A. Surprisingly, The Answer Is No.  Actually, there are several rather interesting ways to take early distributions from your 401k without incurring the 10% penalty.  Two of these are discussed below, using excerpts from a 401khelpcenter.com article:


http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html *


"If you want to retire before age 59 and 1/2, and begin taking distributions from your 401K plan, you will generally be subject to a 10% early distribution penalty. The early distribution penalty is the cornerstone of the government's campaign to discourage us from plundering our savings before our golden years.

Luckily, there are a couple of ways to do this without paying the 10% penalty.


Leaving Your Job On or After Age 55

'There are two key points early retirees need to know. First, this exception applies if you leave your job at any time during the calendar year in which you turn 55, or later, according to IRS Publication 575.  Second, you can only take money from the 401k plan of your last employer..."


Substantially Equal Periodic Payments (Section 72(t))

"The substantially equal periodic payment exception is available to anyone with a 401k plan or an IRA, regardless of age, which makes it an attractive escape hatch..."



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