What Bear Stearns' Meltdown Means to You

March 17, 2008— -- Think the Bear Stearns meltdown isn't affecting you? You might want to check your investments before you answer.

Large mutual funds commonly found in 401(k) plans have invested hundreds of millions in the battered bank, which is being purchased by JPMorgan Chase for $2 a share — a fraction of its price last week.

As Bear Stearns stock plunged and the financial market shuddered, these funds also saw declines.

"I'm sure there are people who don't realize how badly they're impacted indirectly," said James J. Holtzman, a financial planner with Legend Financial Advisors in Pittsburgh.

"Everybody's taking a hit today," he said. "It's not going to be a pretty day."

The good news for many investors is that most mutual funds that do hold Bear Stearns count the company's shares as only a miniscule portion of their total holdings.

The Putnam Voyager Fund, for instance, held more than 960,000 shares of Bear Stearns as of October. That's less than 1 percent of Putnam Voyager's total investments.

The Vanguard 500 Index fund held about 1.1 million Bear Stearns shares as of September. That too accounted for less than 1 percent of the fund's holdings.

Both Putnam Voyager and the Vanguard 500 are among the 10 mutual funds that have the most invested in Bear Stearns.

"With your general growth-oriented fund, I don't really think the situation with Bear Stearns is going to affect you that much," said Bruce Tucker, a principal at Sterling Financial Planning in Sparta, N.J.

"Obviously, clients are looking at their portfolios going down right now no matter what you're doing," he said. But Tucker said he's still recommending that most of his clients continue to stick to their current investment plans.

"It's pretty much sit back, buckle your seat belt, hold on for the ride," said Willis Ashby, the president of Integra Financial in Greenwood Village, Colo. In two years, Ashby said, "you'll come out in the other end worn out, but you'll survive."

Things become murkier if your mutual funds contain large holdings in Bear Stearns and other financial sector stocks, which are also seeing declines linked in part to concerns that what happened to Bear Stearns could happen to other banks.