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Advice from Strangers

This week's guest:
Peter Lynch,
Fidelity Investments

Dear Peter,

I maintain a mix of large and small cap growth-oriented mutual funds in my 401(k). Boy, it's really taken a beating over the past two years. Should I get out of the market and put my money in something fixed until things get better?

Bob Hamilton Wheeling, West Virginia

What? You actually still have money invested in the stock market? Good God man, what are you, some sort of sick, twisted financial suicide bomber? For the love of Christ, sell, you jackass, before it's too late!

I... um, in other words Bob, I think that you would be prudent to diversify your holdings further. Consider reallocating 20 percent of your portfolio into high-grade corporate or government bonds.

Dear Peter,

I've invested about $25,000 for my childrens' college education into several no-load funds. Do you think it makes sense to cash out the funds, take the tax-deductible capital losses, and reinvest the money into a 529 plan? I hear that they're a good idea.

Ross Wyzchowski Madison, Wisconsin

Did I hear you right? Did you just say that you've gambled away your kids' future in a game of Wall Street Russian Roulette? FALL BACK! FALL BACK! INCOMING! CHARLIE'S ALL OVER THE COMPOUND! CASH OUT AND PUT THAT SCRATCH INTO GOLD AND GUNS, BABY! THE APOCALYPSE IS HERE!

So... I, er... what I'm getting at Ross, is, uh, the 529 is an excellent vehicle for college savings. Not only will you be able to write off those paper losses on your original investment, but your contributions into the new plan may be state-tax deductible as well.

(Transcribed by Miles Walker)

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