Do We Face a Loss if We Move Our Money

Question: Dear Luise: When funds in a mutual fund or 401k plan loses money what are the financial ramifications of moving monies to different type of fund within the same company? The basis for this question is as follows:
My wife feels if we move the money, or balances in one fund to a different fund, then we have actually realized the lost.  Were as, I believe we have already lost the money and changing funds does nothing to the actual value of the account.  It merely puts our funds or balance into a different type of fund. D.

Answer: Dear D. I can see where your wife is probably coming from since there have been a lot of warnings regarding liquidating assets after a loss. The standard observation is “if you don’t sell you haven’t lost anything.” Waiting hopefully for some degree of financial recovery is seen as a wise approach.

The truth is that you have already realized the loss and it may be a long time before your portfolio is worth what it was, say, a year ago.

What you are suggesting is that you may have a better chance of recovery in a different fund. That is not selling, that’s transferring assets. You are right in stating that the net remains the same no matter what fund it’s in. Moving it does not devalue it. You do have to consider any costs that will be incurred, of course, but if it’s within the same company they are often marginal. Blessings, Luise

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