A Pre-Y2K Checklist
Worried--or curious--about your mutual fund investments and how they might be affected by Y2K? Here’s a checklist of things you might want to do between now and year’s end:
* Hang on to your paperwork. Financial planners suggest keeping a copy of your third-quarter mutual fund statements--and any other paperwork between now and year-end. Who knows, what if Y2K is the real deal?
* Check if your fund company has completed its own Y2K technical fixes. You can easily do this through the Securities and Exchange Commission’s Web site, https://www.sec.gov. Click the link titled “SEC & Year 2000.” Then scroll down that page and you’ll spot a “Searchable Database” of companies.
* Check how much cash your stock and bond funds are holding. Your manager may already be building cash reserves as a precaution. You can check by going to Morningstar’s Web site, https://www
.morningstar.com and looking up your fund. But the data may be a month or two old. If that’s the case, you can call your fund company and ask if there is a more up-to-date figure.
* If you own junk bond, small-stock or other higher-risk funds, watch for signs that other shareholders are bailing out. Other investors’ selling could hurt the fund’s share price, at least short term. The fastest way to track what’s happening with assets is simply to call the fund company every few weeks for an update, if you’re concerned.
* Check if your fund has lines of credit to deal with any major investor redemptions. Instead of selling securities to meet redemptions, the manager may be able to borrow temporarily. Call your fund company and ask if there is a credit line in place.
* If you decide to sell some of your funds to raise cash, think of selling losers first. “You might want to sell those for tax reasons anyway,” notes Gerald Perritt, editor of the Mutual Fund Letter.
* If you decide to buy stock or bond funds on any Y2K-related market dips, look before you leap. “Call the company before you buy to make sure it’s not about to make a big [capital gains] distribution,” notes Gerald Appel, editor of Systems & Forecasts, a market-timing newsletter in Great Neck, N.Y. Such distributions are typically made in the fourth quarter. If you buy immediately before a distribution, you’re buying an instant tax liability for 1999.
