Paula's query on investing

Greg Nowell GN842 at CNSVAX.Albany.Edu
Mon Oct 12 14:24:40 PDT 1998


1. We've been talkikng about closed end funds. Standard advice is not to buy them when they're over asset value, which is true of the Asian funds right now. So either watch and buy then, or don't buy. You might consider an open fund.

2. Lefties are bad people to ask for financial advice. They always see bears. Financial advice is only useful when bear calls come at useful times between useful bull calls.

3. Forbes publishes every August and early Septembrer its ratings of mutual funds and closed end funds (which I think was Sept.; the other was early August). I personally think this is one of the better ratings out there (money magazine does it, WSJ does it too, I think quarterly and annually) because rather than rate over a specific *time* they rate over *two complete up and down cycles.*

4. Conservative financial advice is: stick with funds, not specific stocks, and stick with funds that have gotten good ratings in Forbes. That is probably about as good as anyone can do. If you want to make a purely speculative move on Asian markets, try to find the best Asian fund you can, and make your move. My only advice is: only do such a thing with money you are prepared to lose. I personally would not go into an Asian equities fund right now, BUT, I confess, the time to buy is when "there's blood in the streets" and things look pretty poor now. However, my brother, who is not on this list, is incredibly bearish. He's not quite in the Mark Jones league.

5. Anyhow, I think it is A) reasonable not to keep all your money in the bank and B) approparite to want to make investments and C) now you have at least one suggestion where you can go to make up your own mind about specific plans. But D) it would be an unfair burden on list members if we were to give advice and the investment were to tank. Also E) if you open an account with an on-line broker, so I am told (I have yet to do it), you will also get access to standard kinds of company and sector analyses on line. So do a search for "on line" broker services and see what you come up. I do know of one, Quick and Reilly, but there are many.

6. One thing you need to decide is how aggressive you want to be in your portfolio. Very conservative would be 100% money market. Less conservative, dirctionally, is 10% money market and 90% bonds. Extremely aggressive is 100% stocks. A standard for people who don't wnat to think about and who are gong to retire in twenty years is 60% stocks and 40% bonds, or maybe 60% stocks and 20% real estate and 20% bonds. This gets into the whole question of Real Estate INvestment Trusts, but the gist of the matter is, if you own a house or condo, you have a significant real estate position, so you might not want to look for a real estate based financial instrument.

7. If you simply want to play "for laughs" with a grand or two, then by all means go Asian equities. But it's unclear what your objectives are. An hour or two in the financial advice section at Borders is a good place to look through two to five books with advice on retirement planning and pick the ones that you'd like to read more thoroughly. I did this some years ago and it was very useful.

8. For what it's worth: I took a huge amount out of stocks in my retirment portfolio today because the DOW was over 8,000. If past experience is any guide, when I make a bear move like this, it indicates the market will double in the next six months. My hope is to move the money back in if the DOW goes down to 7500 or so. But I usually get screwed when I try to pull maneuvers like this. Nonetheless I made an unusually smart move in refinancing our house on Monday, when the US long bond hit its 30 year low before rebounding and local conforming zero point rates shot up from 6.625% to 7.375% in four days. It's smart now at any rate. Perhaps mortgages will drift much lower, and if they take a steep dive there's always the possibility of refinancing again. This will console me for watching the DOW hit 16,000 in the next six months, against, as I have said, my firm expectations.

-gn

-- Gregory P. Nowell Associate Professor Department of Political Science, Milne 100 State University of New York 135 Western Ave. Albany, New York 12222

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