Salt Lake Tribune | 2003-08-24 | Page 64

‘The Salt Lake Tribune Ee BUSINESS Sunday, August 24, 2003 What Is This Thing Called The Motley Fool? SLTRIB.COM Ask the Fool MoTLEY KOOL Rolling Plunder q): have recently been reading about the concept of “rolling” stocks i.e., buying them in the range of $2 to $5, sell ing them quickly when theyrise by a dollar or two, and then Remember Shakespeare? Remember “As You Like It”? In Elizabethan days, Fools were the only people who could get away with telling thetruth to the King or Queen. The MotleyFool tells the truth about investing, and hopes you'll laugh all the way to the bank. Our Mission: To Inform, toAmuse, and to Help You Make Money ® ket” index funds that track the Fool s School‘ repeating the process. What do you think? T. Puder, Gainesville, Fla index of 500 leading companies in Consider Index Funds This kind of strategy scares us. You are dealing with pennystocks (those that trade for less than $5 per share), which are notoriously volatile and risky. Practitioners of “rolling” tech For starters, the mayu. ity of stock mutual funds tend ‘9 underperform the overall stock market average. Making matters worse, manyfunds charge excessive loads, or sales fees, of 5 per cent or more. On an investment of ing about the stocks they buy and sell Another issue is size. As funds available price data.” While the average mutual fund typi- My first stock purchase was based on a hot tip from a co-worker, a single promising news release, cally charges you well over1 percent per year, index funds usually sport and the stock’s impressive gainover a five-day span to $1 per share. Hoping to General Electric (NYSE: GE) recently announced plansto buy the majority of Dutch insurer Aegon’s Transamerica Financefor $5.4 billion. The deal highlights GE’s growing dependenceonits financial services get rich quick, I scraped business. sometimesjust 0.16 percent. There’s little turnover within index funds, too,minimizing commission costs and taxable distrib- 9 utions. Best of all, investing in who make their money not via the system, but by selling books and seminar tickets. If you choose to invest in individual stocks, see them for what they are actual pieces of reai businesses. Carefully select That’s the bad news. Here’s the good: There’s a simple solution. Instead of healthy, growing companies that are trading at attractive prices, and aim to hang on for a long | read of a brokerage that charges only $1] to buyorsell 100 shares. Is it too good to be true? Lewis Schaffner, Sharon Hill, Pa If it’s charging that little for trades, it’s likely makingits money somewhere else, such as customers. If you sensibly Parcel Post serviceto sell them. In much Learn more at www.broker.fool.com and Www.sec. gov/answers/openaccount, htm. * 1925, | began offering clothes and sporting gear. My fans haveincluded Ernest Hemingway, Babe Ruth and Eleanor Roosevelt. | designed boots and equipmentfor troops in World War II and introduceda tote bag in 1944. By 1951, my store was open 24 hours a day, and | was mailing some 760,000 catalogs yearly. | got my own ZIP code in 1976. | am knownfor outdoor gear and great customer service. You toh Grab your 15 minutes of fame and ask a financial question or share your thoughts with Fool co-founders David and Tom Gardner on The Motley Foo! Radio Show on National Public a bargain. You may get muchricher (slowly) with a solid company whose stock trades for $100 per share than with a flaky firm trading for a few dollars or pennies per share. With divisions all overthe financial services arena, GE Financeis a diverse business in its own right.If the companymaintainsits discipline andsticksto fairly priced deals that add to earnings(at least in a reasonable timeframe), its strategy could go a long waytowardreturning somesizzle to GE’s bottomline. CHHSSHSHSSHSSSHSESHSSSSHSHSSSSEHSHSHGHSHTSESSHESEHSHSESEEEHEHESEHHEEED LAST WEEK’S TRIVIA ANSWER who differentiated me with wide aisles, bright lighting, friendly service and a broad assortment of goods, including pots and pans. | often amazed nearby customers who called in orders by delivering their goods before they hung up the phone. | soon began selling ice cream and hot foods, too. One of my proudest claims is having invented the milk shake. | had 500 stores by 1930, and today | am the nations largest drugstore chain, with more than 4,000units and annual sales around $30 billion. Who am |? (Answer: Walgreens) Write to Us! Send questions for Ask the Fool, Dumbest (or Smartest) Investments (up to 100 words), and your Trivia entries to Knowthe answer? Send it to us with Foolish Trivia on the top [e-mail] or via regular mail c/o this newspaper, attn: The Motley Fool. Sorry, we can’t provide individual financial advice. and you'll be entered into a drawing for a nifty prize! eeeeaeaoeseeeeeeeee continue to grow. Do you have an embarrassing lesson learned the hard way? Boil it downto 100 words(orless) and send it to The Motley Fool c/o My Dumbest Investment. Got one that worked? Submit to My Smartest Investment. If we print yours, you'll win a Fool’s cap! Last Weeks Trivia Answer: My first store was opened by a pharmacist in Illinois in 1901 company. Who am |? Got a question for the Fool? Send itin see Write to Us business to PMI Group (NYSE: PMD. GEremainsinvolved in nearly every business imaginable, but investors should be aware of the ongoingshift. In 2003, GE Financewill accountfor nearly 50 percent of earnings, and with Immelt’s demonstrated commitment to acquisitions, that numberwill stocks arecheap, but theyare rarely can’t buy shares of me, because | am a private Radio. Call anytime toll-free at 866-NPR-FOOL underperforming bond insurance prepared by the company, that wants to make itself look good. Penny mon Sense on Mutual Funds by John C. Bogle (Wiley, $19). per trade usually won’t matter mers. Newsreleases, meanwhile, are The Fool Responds: Be waryof Learn moreat www.fool.com/ My founder invented a hunting shoe in 1911 and used the new U.S. anystock trading for less than $5 per share those are volatile penny stocks, easily manipulated by scam- transforming GE Finance into a muc larger and moreflexible financial services firm. Since taking the reins in 2001, he has injected a great deal of capital into the unit, purchased the lending divisions of Abby National and bankrupt Conseco, and shed GE’s the firm. The stock was soon school/mutualfunds/mutualfunds.htm and www.indexfunds.com or read Com- don't trade stocks too often, then paying a few extra dollars CEOJeffrey Immeltis |=} % committed to growing and delisted, and my money was gone. Brett Adler, San Diego minimal fees.” Name That Company in other fees it charges its industrial giant. Exchange Commission investigated the best way to own commonstocks is throughan index fundthat charges eeeeeeeeeeeeeeeeeeeeeeaeeeseenes ese eeeeee erate than an old-economy next dayas the Securities and tional and individual, will find that seeking those few funds that do tend to beat the market average, you can choose to match the market average. Invest your long-term moolah in index mutual funds that are designed to track the performance of a broad market index. Two good options are S&P 500-based index funds and “whole mar- time. parator Systems the next morning. The stock unexpectedly openedat $1.50 per share, though, and suddenly | owed mybrokeran additional $500. Making matters worse, trading in the stock was halted the @eeeoeseeeaceeneseaeee ee eeee managers do it? These kinds of systems are often taught by people Manyinvestors purchasestock in General Electric because it’s viewed as one of the most diverse businesses in the world. Indeed, the companyis jokinglyreferred to as a mutual fund, but with each acquisition GE is becoming moreofa financial conglom- together$1,000 and instructed mybrokerto buy 1,000 shares of Com- prow bigger (and their man/ index funds is simple, taking very agers usually try to grow , - little time or energy. Once you have them so they can collect more in A) invested in them, you can forget fees), it becomes much harder about them, thoughideally, you to deliver strong results. The ‘6 will keep adding money periodically. more money a fund has to invest, the However the stock market performs in more likely it is that significant sums the coming years, your index fund will be invested in less promising comwon’t be far behind. panies, as the managers have to spread Even superinvestor Warren Buffett the money around. advised, “Most investors, both institu- so well, why wouldn't all money a LC GE Financed extremely low fees $5,000, that’s $250 gone at the outset. Think about howeffective this is really likely to be. If it worked Se ich Dumbest Investment Burned by a Penny America, while the Wilshire 5000 is the broadest market index, tracking all U.S.-based stocks “with readily Investing via mutual funds is appealing, but it’s not without drawbacks. niques often knowlittle to noth My Wilshire 5000 index. The S&P 500 is an eee eeeeneeseneeeeseeeeeaeeeeaeeeeeeeeeeeeseeeeeeeeceeeeeeeeeeeeseeoeeeeeeaeeeeeeeeeeeeee ee ee eee ‘2003 THk Morey Foo./Dist. By UNIVERSAL PRESS SYNDICATE na warm and sunny Saturday in Rome, my wife, Georgina, andI will live andfuture ratesof in- vestment return andinflation, among otherthings. But as complex as that number crunching can be, we cannot begin to attempt it until we answer thefirst questionfirst: How much money will we spend each yearin retirement? The overly simplistic answer I have been guilty of parrot- spent one American cent by tossing it into the famed Trevi Fguntain and wishing for good health (and a return to Rome, of course). Anotherexpenditure that afternoonon July 26: The equiva lent of $28.28 in American money that’s 24 Euros charged to ourcredit card, tip included for an alfresco lunch of minestrone soup, breaded chicken cutlets and steamed broccoli, served with a bottle of sparkling mineral water at the La Locanda del Tempio restau rant on the pedestrian-only Via di Pietra, while we watched the throngs of tourists stroll by. HUMBERTO CRUZ THE SAVINGS GAME ing it sometimes — is at least 70 percent to 80 percent of your pre-retirement incomein order to maintain the same lifestyle. As someastute readers have mine how much moneywewill need, or want, to spend each yearin retirement. Once we do that, we need to calculate what size nest egg will be big enoughto allowusto spendthat much. The secondcalculation can be a tricky one, involving assumptions about howlong we Details about the weather, menu and scenery that day come from our happy memories. Details about how much we paid come from our moneydiary where we record, literally, every pennywe receive or spend. Many people pooh-poohsuch pointed out, such an answer to- tally misses the mark. “The amount of money neededfor living afterretirement should not be a percentage ofpre-retirement income, but of pre-retirement spending,” said Adrianne Roberts, a South Florida resident who retired at age 55 three years ago. The obvious reason: Not everyone spends everything they earn. So, if you want to project the present into the future, what matters is not how much you make now, but how much you spend. And the only way to knowfor sureis to keeptrack. In the more than 12 years of writing this column, I have had the opportunity to discuss the subject of retirement planning with at least 250 professionalfinancial advisers. I have read at least 100 books on the subject andtested at least two dozen retirement planning calculators. 5 YEAR ie): §00% 2 YEAR voice a Salt Lake CD Rates 801-487-1692 Sandy 3 year term 550% 6.20% 3.10 a 801-685-8928 Annual % Yield* Annual % Yield* Annual % Yield* simple interest rate 7.70% simpleinterest rate 5.83% simple interest rate 5.35% APY* 5 year term Magna 4 00 % 801-250-5411 a APY* *Annual Percentage Yieldas of 8/19/03 for early withdrawal, Rates subject to change without notice Membershipandeligibility required ALIVAIN Biss [A Investment Notes Keeping track of how much NETWORKS date > video At TransWest Credit Union, yoursavings are federally insured to $100,000 by the NCUA. Call or stop by today! www.transwestcu.com UNITED STATES POSTAL SERVICE . ¢ Minimum investment $5,000 weare spending nowis the most effective wayI havefoundto begin to answertheelusive ques tion of how much moneywe needto be ableto retire That’s a question puzzled readers ask meconstantly, and one that seems particularly pressing these days. I have writ ten repeatedly about surveys that show Americans are in creasingly worried they will not have enough money to retire comfortably. Manythink they will never beable to retireat all The answerto the how-much money-we-need-in-retirement question must come in two steps. First, we need to deter | Humberto Cruz can be reached at [e-mail] or c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1500, Chica80,Ill. 60611. Taylorsville painstakingattention to finan 485-1 1 07 p Te into this all-important topic. 801-572-6003 cial detail. Others considerit too bothersome. Ourexperience is quite the opposite. Such recordkeepingtakes lit tle time whenyou do it regular ly, particularly with easy-to-use and inexpensive financial soft ware so readily available. And the insights youwill get from your records will form the cor nerstone of yourfinancial plan ning Phone Systemsfor Business And, if not more important, I planned for my own retirement fromfull-time work — successfully, by all accounts — at age 55 on Sept. 29, 2000. Andit all began with knowing how muchI spend. Next week, I will delve more deeply Purchase or LeaseIn Riverton, UT 84065 orIl below. * Interest compounded daily can be paid monthly, Option I: This option is for the purchase of a single site on which a 22,296 square foot building can be constructed. Site size is approximately 3.27 acres net useable (exclusive of setbacks, easements, driveways, commonareas, irregular shapes, etc.) The recommended width to depth ratio of 1:1.5 is desired Option Il: This option is a) lease/own a building to be used as a Carrier Annex (18,194 square feet on a 2.17 acre site) and b) lease a Retail Store (6,500 square feet on a 1.68 acresite.) quarterly, semiannually, annually or at maturity For a Prospectus & Free Information CALL 1-800-259-5862 The preferred area(s) for these options are: www.advanta.com/notes North Option I: 12400 South South: East 12800 South 1530 West West: 2200 West OptionHl: 12400 South 12800 South 1300 West 4000 West The Postal Servicewill consider letter proposals. However, the selected space and/or site(s) must be contracted for using USPS PROVIDING FINANCIAL Services SINCE 1951. document (Offer to Sell or Lease forms). A minimum of 90 daysis required for processing these proposals. visit us of Parkside Tower 215 South State Street; Suite 100B Salt Lake City, UT 84130 For additional information, call or write: Robert R. MacGill, Real Estate Specialist The Annual Percentage ) elds above are available through August 30, 2003. This announcement is neither an offer to sell nor a solicitation of > ) buy Notes. Theoffer is made only by Prospectus to residents of select states, including UT and CA. TheNotes are being sold by Advanta Corp. and the proceeds will be used for general corporate purposes. The Notes represent obligations of Advanta orp. and are not nsured or guaranteed by the FDIC or any other governmental or privateentity aa al Percentage Yield assumes interest is paid only at maturity. Advanta orp/a Publicly Owned Company, is trac 1 on NASDAQ (Symbols ADVNA & ADVNB) Source Code: FPCBSXBAXX ? Needs Land or Building for The United States Postal Serviceis looking for either land of building(s), which meeteither of the criteria listed under Option | * Terms from 3 months to 5 years ‘ Union YOUR MONEY AND FUTURE ON THE RIGHT TRACK™ = Denver Facilities Service Office 8055 E. Tufts Avenue, Suite 400 Denver, CO 80237-2881 303-220-6567 FAX: [phone] Mailed Offers to Sell or Lease should be received no later than Ciose of business September 1, 2003. All offers to sell must include a Site plot plan and a city location map of the property.