| OCR Text |
Show The Salt Lake Tribune BUSINESS Sunday, September7, 1997 to create a fun learning experience for novice and savvy inves- tors. “This lets you try new things, test your nerve and review how you make decisions,” says Gerald Perritt, editor at The Mutual Fund Letter. “Many investors don’t makeconsciouschoices. Ask why they own a fund, and they CHARLES A.JAFFE Un-Portfolio Can Improve Your Game Play a game, not the market, to becomea better investor. The pressure of managing money turns somepeopleinto nervous wrecks, driving them to distrac- tion, self-doubt and mistakes One way to overcome that prob- lem is to “play the market,” liter- ally turning the investment world into a game,a living laboratoryon how to construct a fund portfolio. So hereis an idea to play with: Rotisserie Mutual Funds. Theideais simple: pick a hypothetical portfolio of funds and aim for a performance goal. Then managetheportfolio over time to see if you canhit the target. “There is a lot of value in going through exercises with imaginary money,” says Michelle Smith, managing director of the Mutual Fund Education Alliance, which lets investors build hypothetical portfolios on its Web site. “A lot of investors are cowards when their money is on the line. They don’t trust their judgment orinclination. A hypothetical portfolio shows them whatthey do well and badly, so they learn from both.” Sports fans play hypothetical gamesall the time, creating so- called, “‘roiisserie leagues” and drafting “teams” of real ball- have no answer.’ Until someone invents rules and a score-keeping system for Rotisserie Mutual Funds, you'll have to set up the contest your- self. investor's performance. That makesportfolio building a crucial skill. Workon that discipline by limiting choices to one fundpercategory, meaning a basic portfolio might include one choice each in the aggressive growth, growth, growth-and-income, bond, international and sector fund eategories. Or do it by asset size, with each portfolio including one fund serve as a lesson about how much the future — when you have money to actually implement your strategy If you want to playwith friends a too-conservative approach is costing you. Lastly, list three reasons for picking each fund. As the game progresses, you will see how your logic stands the test of time. ternationalchoice. As for the money you are “‘investing,” make it a realistic amount,so that the trades are the kind you might makein real life. Your hypothetical portfolio could @ Trading: There usually is a keeping score, somehow tracking many portfolios with several price to pay for changing your mind. If you make a trade in your imaginary portfolio and the fund has made moneyfor you, pay the tax bill. That means subtracting taxes due before reinvesting proceeds funds each. @ Rules: Most investors don’t buy fundsallat once to construct an entire portfolio. Instead, they Pick new funds whenever they from the sale. And if sales charges, redemption fees or anything else takes a bite of your money, make sure your imaginary portfolio has the teeth marks to proveit. @ Prizes: If you play in a group, a small entry fee might liven things up a bit. Under anycir- cumstances, the lessons learned will be the biggest prize of all. Charles A. Jaffe is mutual- funds columnist at The Boston Globe. He can be reached by email at jaffe@globe.com or at The Boston Globe. Box 2378, Boston, MA 02107-2378. @ Learn More Where to learn more about buying stock direct from companies, and about dividend reinvest- suchasSitzer will do so, hoping te cultivate a new client for other services. Direct buyers, on the other hand, can buy a stock from scratch on their own, though minimum initial investments can run from $250 to $1,000. About 900 companies offer DRIPs. Direct-purchaseplans are lantic Corp., Advanta Corp. and First USA Inc. “Companies are making it so easy to buy stock directly... It’s large-cap arenas, plus, say, an in- or co-workers,the obstacle will be @ Target: It is tempting to shoot fortop returns, but that encourages taking risks beyond what you can stand in reallife. If youare playing solo, simply look at your own objectives and pick a goal. If you need, for example, a 12 percent annualreturnto comfortably reach your goals, make that your target. @ Season: Hot stove leagues usually last a few months. In fund investing, the “season” should run forat least three years. You can reward yourself for having good quarterly or annual performance, but this gameis a marathon, nota sprint. GANNETT NEWSSERVICE Look out, stockbrokers. More and more companies areselling stock directly to small investors. The past two years, some 300 companies have begun direct stock sales. Among them: Bell At- from the small, medium and Here are suggestions for dealing with the essential elements of the game: @ Players: This is a game you can play aloneor with friends. If you do it on your own, you can managethe hypotheticalportfolio against your real investments, or can try several different investment styles to see what makes you most comfortable in Direct Stock-Purchase Programs On the Rise have money to invest. Studies show, however, that asset allocation — more than fundselection — is the biggest determinantof an fewer — more than 300 — but an alternativeto using a broker,if you're willing to do the research growingfast. Both avenues may let stockholders buy less than a single share, chipping in as little as $10 yourself,” said Tracy Rusch, a marketing consultant and amateur investor in the Wilmington, at a time. Bell Atlantic will automatically transfer $50 a month from an investor's bank account and turnit into stock. Del., area. Ruschstill pays a broker’s higher fees to buy some stocks, especially those of hot new companies that don’t sell directly. But in many cases, she said, there’s no But neither approach works well for investors who like to trade frequently, or buy on a hot tip. Companies with DRIPs typi- reasonto do so. Direct purchases have their place, said broker Jeremy Sitzer of Dean Witter Reynolds Inc.in cally collect buy orders and turn them into stock once a month; those with direct purchaseplans, once a week. just want to buy bluechips,it’s a very effective way to doit.” A 1994 ruling by the Securities and Exchange Commission paved the way for direct stock pur- timescalled “no-load” stocks, because there’s no traditional bro- Wilmington. “For people who know whatthey’re doing, and who chases, a new twist on the decades-old dividend reinvestment plan, or DRIP. But there are differences. Under a company’s DRIP,dividends paid must go to buy moreshares, though there are no broker fees on the purchases. Direct buyers need not reinvest dividends, though many do. DRIPsareavailable only to existing shareholders. To get into a company’s DRIP program, aninvestor mustfirst buy at least one share,typically through a broker. Somebrokers maybe reluctant to handie such a small order. Others Direct purchases are some- kerage commission. Often, though, there are other fees in- volved. Some companiestack on $5 or $10 to the initial purchase, or charge $5 with each order. “Compared with $40 or $50 for a broker, it seems pretty reasonable,” Rusch said. One more caveat: Without a broker, investors face complicated paperwork at tax time to figure out capital gains on shares bought with reinvested dividends and then sold. For clients with DRIPs, though, Sitzer and other brokers will provide an account- ing at no charge. While direct purchasing offers benefits for individual investors, mentplans: @ Direct Stock Purchase Plan Clearinghouse, 800-774-4117. A free ser- vice thatlets investors or- der up to five prospectuses. @ The Directinvestor World Wide Web site (www.netstockdirect.com) offers a list of more than 300 companies with direct-investmentplans, updated daily. @No-Load Stocks Info (www.mk.ml.org/noload) offers details on dozens on direct stock purchase plans. DRIP Investor, 219852-3220; $59 a year for monthly newsletter and directory of DRIPs. Direc- tory is $15.95 for nonsubscribers. DRIP Central: Web site Invest-o-rama!’s list of Internet resources on dividend re-investment and direct stock purchase plans (www.investorama- .com/dripcent.shtml). it also can do good for the companies that set up suchplans. “This really is designed to make it so easy and so economicalthatit gives everybody an opportunity to invest in this company,” Beneficial spokesman Bob Wade said. “It’s another way for us to makestock available. . . and we knew there was interest out there,” said Jay Grossman of Bell Atlantic. The company’s directpurchase program drew about 500 investorsin the first 10 weeks after its mid-March launch. players whosestatistics drive per- formance, Insteadof choosing players and using their statistics to play out a “season,” build an imaginary fundportfolio from scratch, pick- ing funds and managing the hold- M ings overtime. Asin the sports leagues, rules Y T H for a “hot stove” or rotisserie fund league can vary. Theideais “Banks tend to take women’s dreamsless seriously.” STATE OF UT. ADVERTISEMENT TOR SPACE eSoft eclemesert SaUeEto reat SEoF nce omc pce er te Se Bae ots ‘PROPOSAL IDENTIFICATION: DFCMB708-11 AMOUNT OF SPACE: 1,744 square feet LOCATION:North Utah County e Bastof UtahLaxe ‘Boundary on te weaton to thWasnich ‘Mountains on the east. LENGTH OF LEASE: Three (3) years PARKING: Ten (10) parking stalls. Parking alls re to be onalwith no public roadway or ting the parking area OCCUPANCY:As soon as possible Please submit proposals to: Doug Fulimer Division of Facilities Construction a 4110State 01 ding Salt ake ly,Ute Guts eats Telephone: 538- NO 5004 10m@ an $30 _ aeeee Scottsdale : $40 _ $55 Schwab Quick & Reilly Fidelity(109118165 Olde M Y T H B R O K E N HO 118 166 60100125 Waterhouse 5370138 Merrill Lynch 201 265. 48 y Shelley DeProto, owner of Caffé Molise Restaurant and Rustica Fresh Gourmet Foods beganwith the idea ofstarting a deli. In four years, the idea has grown into twoofthefiner eating establishments in Salt Lake. “I thoughtthat by moving my accounts to a larger bankI'd be a small fishin a big sea of banking.In reality, they treat me asanindividual.With First Security, I'm getting 112% service.It’s made running my business so much easier.” Business Solutions by First Security Bank: financial assistance, employee "Large traders may quali) frour ne ‘ven lower Supersaver retirement accounts, leasing options, Call VOUR GUIDE TO COMMISSION SAVINGS” 139 East South Temple #50 322-1122 1-800-947-1955 First Fact is, womenare starting new businessesat twice the rate of men. Looking to start a revolution of your own? First Security's Women’s Financial Services GoodnessGlaciers! = join The Sait Lake Tribune's 1997 cruise tour to Alaska. investment opportunities and a wide rangeof services to enhance your business. can help. To find out how the largest Intermountain Bank can partner with your dreams, call Kathy Hillis of 2465131, ortoll free at 1*888*299*0636. Ba ® Currently Giving 110%. Women's Financial Services Call (801)237-2018 for more information. ee fp exex to Ammen ee |
