David McPherson Answers Your Questions About the Credit Crisis

Toni from New York, New York, asked: "I have been unhappy for some time with the performance of my Smith Barney retirement fund and I'd like to move the funds to First Manhattan in the hopes of a better return. Is now a bad time?"

McPherson answered: It's never a bad time to review where you keep your retirement funds, but I would do it in a deliberative way and not act rashly because of recent events. There may be good reason you're unhappy with the performance of your current retirement fund. Just be aware that no matter where your funds were held, if they were invested in stocks, they very likely would have experienced losses since the beginning of the year. Legitimate reasons why you may want to consider moving your retirement account include investment expenses, your relationship with your current advisor and convenience.

Depending upon how much money is involved, you may want to consider seeking the assistance of a fee-only financial planner to help guide you through the process, who is not compensated for recommending a particular investment product. Two groups you can check out to find a fee-only planner are the National Association of Personal Financial Advisors and the Garrett Planning Network. (Disclosure: I belong to both of these groups, so keep that in mind, as well.)

Russ from Mishawaka, Indiana, asked: "I have $20,000 in Bear Stearns taxable bonds, market value currently about $15,700. Do I need to worry that JPMorgan won't meet their obligation on this? Thanks for your answer."

McPherson answered: Russ,You are probably in better shape than Bear Stearns stockholders. One reason JPMorgan Chase was able to pay just $2 a share for Bear was that it will be assuming all of the company's debts, including the bonds you own. The shareholders got pennies on the dollar because JPMorgan Chase agreed to assume the risk associated with Bear's substantial debt load. That means if the sale goes through, there's a good chance JPMorgan Chase will make good on your bonds.

Keep in mind that with any corporate bond there's a chance the company will hit tough times and not be able to pay back bondholders. It appears, however, JPMorgan Chase may be one of the strongest Wall Street players in the current environment.

You could be at greater risk if the deal falls apart and Bear Stearns is forced into bankruptcy. Then you might get nothing. According to news reports, Bear Stearns was preparing a bankruptcy filing at the same time it was negotiating the sale to JPMorgan Chase. I'd be more worried about that possibility than whether JPMorgan Chase makes good on your bonds.

June from Johnston City, Illinois, asked: "I have about $100k invested with A.G. Edwards/Wachovia. In the newscast, I heard that if you are insured with FDIC, you are safe. I do not believe this company is FDIC. The account is insured, but not with FDIC. I would take a loss, but do you recommend selling all and moving elsewhere? What companies are FDIC insured? Thank you."

McPherson answered: June, your accounts most likely are insured by the Securities Investor Protection Corporation (SIPC). It is a nonprofit corporation established by Congress in 1970 to insure securities and cash in accounts with member brokerage firms like Wachovia Securities, which now owns A.G. Edwards. It provides insurance up to a maximum of $500,000 per account with a $100,000 limit on cash or cash equivalents.

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