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401(k)s vs. 403(b)s
Q: What’s the difference between a 401(k) plan and a 403(b) plan? — B.H., Port Charlotte, Florida
A: Both are tax-advantaged retirement plans, with 401(k)s targeting private-sector workers and 403(b)s primarily for employees of tax-exempt employers, such as educational institutions and some nonprofits. They have the same or similar contribution limits and both can be offered in traditional and Roth form. (Traditional plans feature upfront tax breaks, while Roth plans permit tax-free withdrawals in retirement.)
Both can provide matching employee contributions to some degree, but matches are more common with 401(k)s. If your plan matches contributions, be sure to grab all the matching funds you can — that’s free money. Employer contributions may take several years to fully vest, but 403(b) plans are more likely to feature quicker or immediate vesting. In both cases, employee contributions are fully vested immediately.
Many 401(k) plans are administered by mutual fund companies, while insurance companies frequently administer 403(b)s. Thus, 401(k) investment menus routinely feature mutual funds, while 403(b)s often feature annuities along with funds.
Learn more at 403bwise.com, at Fool.com/retirement, and by trying our “Rule Your Retirement” service at Fool.com/services.
Q: What are some unusual ticker symbols? — F.T., Honolulu
A: Lots of ticker symbols are clever. For example: Southwest Airlines (LUV); 3M (MMM); Yum! Brands (YUM), the parent of KFC, Taco Bell and Pizza Hut; Brinker International (EAT), the parent of Chili’s; explosives maker DMC Global (BOOM); Molson Coors Brewing (TAP); Gibraltar Industries (ROCK); National Beverage (FIZZ); Heineken (HEINY); Sotheby’s (BID); Olympic Steel (ZEUS); and amusement park company Cedar Fair (FUN).
Before they were bought out, eyewear maker Oakley sported the symbol OO and mattress maker Sealy had ZZ.
When the Stock Market Plunges
The stock market suffered an unusually big drop on Aug. 5, with the Dow Jones Industrial Average plunging 767 points. That certainly seems huge, but focus on percentages, not points. With the Dow trading above 25,000 for most of the year, 767 points represented a drop of 2.9% — meaningful, but not disastrous. (It dropped 800 points on Aug. 14, too.)
The stock market can be volatile, and occasional big drops will happen at times that we can’t exactly predict. When there are recessions, multiple drops can have stocks falling in value by more than 20% or 30% overall.
That sounds scary, but there’s good news, too. Every drop has been followed by an eventual recovery, and the market going on to set new record highs. Some recoveries happen quickly, and others can take years — which is why you should only invest dollars you won’t need for five or more years in the market. The day after that 2.9% drop, the Dow popped up by 312 points, or 1.2%. (Even during a correction, prices will bounce up and down.)
Smart investors don’t sell in a panic when there’s a big market drop. Instead, they often shop for bargains. If there were some companies you were interested in adding to your stock portfolio before a big drop, they will probably be trading at more attractive prices after it. Mutual funds you’ve had your eye on will likely sport lower prices, too.
If you’re uneasy about hanging on to any particular stocks, do more research and find out whether their prospects still seem solid or the reasons you bought them are no longer valid.
EDITOR’S NOTE: The Motley Fool is an investment column created by brothers David and Tom Gardner and distributed by Andrews McMeel Syndication.