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Show TheSalt Lake Tribune BUSINESS YOUR FUNDS Sunday, November 21, 1999 Investors Win With New Legislation Lawrepealing finance, banking barriers should makeit easier, cheaper to invest ‘THE ASSOCIATED PRESS NEW YORK — The sweeping CHARLESA. JAFFE Automatic financial-services legislation recently passed by Congress and signed into law by President Clintonwill probably create some short-term confusion for mutual- = pura “Tt will be a seamless transition for the censumer. The individual inves- tor will see very little difference.” said the changes could lead to. some short-term confusion for investors because companiesthat were previously banned from selling funds directly to the public can nowdo so. Investors have traditionally purchased mutual funds from Investing Is fund buyers. i ultimately i But tthe new lawwill makeit easier for consumers to Burt Greenwald Under-Used purchase funds, and may even drive down fees and expenses at Mutuai-fund consultant broker, from so-called supermarkets created by discount brokers such as Charles Schwab, and al directly from fund groups. The Mostpeople invest one way in their retirementplan, and anotherwith therestoftheir money. Thatstatementis not about investment strategy — ageres- sive or conservative — but abouta basic strategy of investing. Retirementplans such as a 401(k) or 403(b) typically require regular withdrawals from paychecks, an amount chosen by the employee that goesdirectly into his invest- ment account. Theidea is automatic, pain-free investing that allowsfor purchasesat regularintervals, regardless of market conditions,andlets anestegg growinto some- thing significant over the years. Yet whenit comes to saving outside of retirement plans, mostinvestors do not make regular, automatic investments. “It's the easiest way to take a little money and haveit grow into something,” says Robert Powell, managing director at DALBARinc., a Boston financial-research firm. “Maybe people don’t have anythingleft to save. If they have somethingleft over, you would think this is how they wouldsaveit.” Yet unpublished data from arecent Investment Company Institute/Securities Industry Association study showed that of investors who own funds only outside of retirement plans, just 24 percent enroll in automatic-investmentpro- gramsto movedeposits from a bank account or paycheck to their funds. Thereis no industry-wide the sametime. The bill represents arguably the most signifi icant overhaul of the nation’s banking and dicted Burt Greenwald, a Philadelphia-based mutual-fund consultant. ‘‘The individual mutual funds have emerged as_ one of the most popular invest- investor will see very little difference.” the impactwill trickledown tothe nearly 50 million U.S. households that currently own funds. Supporters of the legislation, which overturned portions of the landmark 1933 Glass-Steagall Act that separated services provided by commercial banks, investment banks and insurance companies, say it will increase competition Chase Manhattan and Citibank, have been selling mutual funds indirectly to consumersfor years through third-party distributors. The repeal of Glass-Steagall means simply that the banks, which have always handled the marketing of their fun now be able to assume respon ity for direct sales. ment products during those six decades, it stands to reason that and benefit consumers. Opponentsarguethat it allows nies, who will quickly turn around and take advantage of on mutual-fund consumers will likely be lower fees and expenses, Most mutual-fund analysts say the truth lies somewhere in- ated companies to compete with other large companies that pro- almost certainly occur, the experts say, but price-gouging In addition, he said, consolidation among companiesthat seli their customers. between. Consolidation will would be suicidal in the face of program that endeavors to makeinvesting easy andrelatively pain-free would be embraced almost universally by the investing public. “Tt is one of the most widely available features for mutual funds,but one of the most under-used,” says Investment costs. Onthe other hand, Rosenbaum Binoculars Nikon Bushnell Swift Zeiss Swarovski Bausch & Lomb Holiday Sale! Wild Bird <3 4898 Highland Dr. Your optic's specialist ara a er enumein Snioked Salmon Med. & Lg Jumbo Shrimp PanoCURAemit abeie Sa agi ple, this should be a nobrainer, but apparently it Automatic-investment plans haveseveral plusses. For starters, they represent a low entryprice to a fund. 260-SOUTH ae Theera is gone when most funds allowed investors to openaccounts for under $500. Today, the average minimum initial investmentis well over $1,000, and mostof the fund families offering cheaper Music to my ears... CD rates that entry are no-name companies don't require charging high expense ratios. But virtuallyevery fund a $10,000 deposit] firmwaivesits minimum requirements for investors whohave some amount (typicallyfrom $25 to $100) depos- ited automatically, usually on Pee Cd a monthly basis. More important, however, is that automatic-investment plans havethebenefit of allowing an investorto follow oneofthe keyrules of savings, namely “pay yourself first.” In fact, many fund compa: nies acceptdirect deposits, so that a portion of your pay. check (or Social Security check) can go directly into a fundthe same, easy way it flowsinto a tax-advantaged retirement account. Automatic savings builds discipline, People who put investing on auto-pilot are less likely to swerve when the market moves. They not only saveregularly, theyget the 6.50% apy PACU Salt Lake County residents, YOU can join! Call now! 801-487-1692 Salt Loke City 37 West 1700 South 10692 South State Te 6189 South Redwood long-term benefits ofdollar cost averaging Charles A, Jaffe isa mutual funds columnist at The Boston Globe. He can be reached by email at Jaffeaiglobe.com or at The Boston Globe, Box 2378, Bos ton, MA 02107-2371 funds will meanthe elimination of funds that duplicate each other and help to erase overlapping Company Institute spokesman John Collins. “For most peo: isn't.” vide similar services. “It will be a seamiess retirement) accounts take maxxing out contributions to retirement-savingsplans. Still, it would seernthat any as consolidation forces newly cre- rising competition brought on by mergers and acquisitions. advantage ofautomaticsavingsplans. As Powell noted, that could be because investors are Edward Rosenbaum, director ofresearch at Lipper Inc., a New York firm that analyzes mutual funds, said the long-term impact investment anddirect-deposit the major fund companies and transfer agenciesreport that anywherefrom 10 percentto 25 percent oftheir retail (non- Greenwald noted that large commercial banks, including for the creation ofasmallnumber of hugefinancial-services compa- statistic for use of automatic programsbyall investors, but transition for the consumer,” pre- financial-services systems since the Great Depression. And since W‘TRANSWEST Creaie Union three sources through their repeal of Glass-Steagall will dra- matically increase those options. Geoffrey Bobroff, an industry consultant in East Greenwich, R.L, said the legislation will increase investors’ ability to pur- chase mutual funds over the Internet as companies that can nowsell funds begin to market them ontheir Websites. “Mutual funds will be much more readily available in many moreplacesthan they have bee Bobroff said. Bobroff predicted that the first wave of consolidation set off by the newlegislation will be among the commercial banks, brokerage firms and insurance companies that were previously kept apart underGlass-Steagall. The second wave will involve acquisitions of mutual-fund cempanies, which will be needed to complementthe so-called financial superstores created during the first wave of consolidation, according to Bobroff. Anotherlong-termeffect cited by Greenwald wasthe likelihood that financial-services stocks as a whole will receive a boost from the opportunities presented by the new laws. Consequently, mutual funds that invest in the financial-services sectorwill also receive a boost. Money Scoreboard ore Caerecie : : : BankRate Monitor's survey of the 10 largest banks and S&Lsin the 10 largest metro areas. Mortgagesare conventionalloans at 80 percent loan-to-value. Car loans are for $9,000, 20 percent down, 48-month new car. Personal loans are for $3,000 24-month unsecured loan Mortgages 1-year Date 30-year 15-year ARM This week 7.70 7.35 6.43 Last week 7.70 7.33 6.49 Lastyear 6.81 648 5.80 Others Car 6.89 8.89 8.80 Personal 14.74 14.71 15.08 Credit card* 15 88 16.12 13.83 “Average has changed from a fixed rate card to a variable rate card -Bank deposit yields 3 Sees BankRate Monitor's weekly surveyof the 10 largest banks and S&Ls in the 10 largest metro areas. Date MMDA* 6-months 1-year 2-1/2-year This week 2.07 451 Last week 2.07 4.50 Last year 2.39 4.23 * Money Market Deposit Accounts 4.90 4.90 4.35 5.10 5.10 4.43 5-year 5.39 5.39 456 Yields on biggest money funds Hereare the 15 biggest money-market mutual funds opento individuals with their current seven-day annualized yields This Last 6 mos. Fund (ranked by size) week week ago Merrill Lynch CMA Money Fund 5.05% 5.02% 4.38% Smith Bamey Cash Port/Class A Vanguard MMR/PrimePort Fidelity Cash Reserves Schwab Money Market Fund SchwabValue Advantage MF MorgStan DeanWit/Liquid Asset Centennial Money Market Trust DeanWitter/Active Assets MT PaineWebber RMA MF/MM Port Merrill Lynch Retirement Res.MF PrudentialCommand Money Fund Wells Fargo MMF/Class A Alliance Capital Reserves Fidelity Spartan Money Market Fund Avg. taxable money fund Tax-free funds Source: MoneyFund Repart 5.02% 5.27% 5.20% 4.95% 5.32% 5.14% 5.19% 5.20% 496% 5.21% 5.11% 481% 4.65% 5.20% 4.88% 2.98% 4.98% 5.24% 5.18% 4.93% 5.29% 5.15% 5.19% 5.28% 4.93% 5.18% 5.10% 4.82% 4.64% 5.19% 4.82% 2.82% 4.33% 4.63% 4.60% 4 25° 4.61% 4.29% 4.37% 4.56% > 4.41% 4.24% 4.02% 4.57% 4.30% +s 2.85% * * Gannett News Service |