Every Wednesday, Legg Mason Wood Walker financial adviser Jonathan Murray answers e-mail on your investments. To be included next time, send your questions.
> From: Goldstein, Jon W.
Sent: Tuesday, February 19, 2002
To: ‘Murray, Jonathan P.’
Subject: $
Hello, Jonathan,
Despite the market’s Enron jitters of late, people still want to invest. Our first question is from a reader who just wants to know how to begin:
I don’t know anything about the markets … however I would love to learn
as much as I can about the stocks etc. Do you know of any good sites that
can help explain the stock markets and how to start investing? I would also
like to know if you can give me some pointers on how to get started.
Thank you,
Clueless
From: Murray, Jonathan P.
Sent: Tuesday, February 19, 2002
To: Goldstein, Jon W.
Subject: RE: $
Dear Clueless,
Don’t worry if you aren’t a stock market whiz … it’s pretty easy to learn,
once you understand how investing works. The main thing to grasp is that
when you buy a share of stock, you actually are buying a piece of that
business.
Stock ownership represents ownership in the underlying company,
so that if the company does well, you do well. If the business does poorly,
you do poorly. There are no guarantees when you buy stocks — they can be very
risky investments — but to compensate you for that risk, often the returns
are very attractive.
Many mutual fund sites and stock brokerage firm sites have helpful
information. Try Fidelity, T. Rowe Price or Vanguard to learn more about the
world of investing. Also, pick up a copy of Peter Lynch’s book, “One up on
Wall Street.” It’s a quick, informative read. Lastly, read the Money & Investing section of the Wall Street Journal, and, of course, the weekly Dollars
and Sense section of the Baltimore Sun!
> From: Goldstein, Jon W.
Sent: Tuesday, February 19, 2002
To: ‘Murray, Jonathan P.’
Subject: $
I have held IBM for a long time. With their sharp decline last week, I am
thinking of selling all or part of my 200 shares. What is the outlook for
Big Blue?
B. Querns
From: Murray, Jonathan P.
Sent: Tuesday, February 19, 2002
To: Goldstein, Jon W.
Subject: RE: $
Dear Big Blue holder,
It seems that any hint of accounting irregularity causes traders to sell stock first and ask questions later. That was the case with IBM last week when
they surprised some analysts with the way that they disclosed a $300 million
sale of an optics unit to JDS Uniphase. Consequently, the stock slid 5
points on Friday.
As to whether to hold it or sell it, it really depends on so many things:
Have you made a lot of money in the stock? Do you need to get to that money
any time soon? Would you like more income from your investments? Would the
gain/loss be taxable? What is your risk tolerance? Do you have a better idea
for the proceeds?
Knowing when to sell a stock is the toughest thing in investing. Knowing
when to buy something is a lot easier.
It used to be that with a quality
company like IBM, people would tell you to “put it away and forget about
it” … hold it forever. Today, that strategy doesn’t always make sense, as
we’ve seen a graveyard full of high quality stocks that have fallen
precipitously, including Lucent, Cisco, Dell, AOL, Intel … these were all
stocks that 2 years ago, everyone “had to have” in their portfolio. Now,
many people wish that they sold some of their shares.
Talk with a financial
adviser about the questions I brought up earlier, and you should come to
your answer.
> From: Goldstein, Jon W.
Sent: Tuesday, February 19, 2002
To: ‘Murray, Jonathan P.’
Subject: $
I have a CD invested with Bank of America. It will mature Feb 28, but I’d
like to have a quick reference as to who I would be better off with and who
would offer a higher rate.
Thanks for any info. you can provide.
Char
From: Murray, Jonathan P.
Sent: Tuesday, February 19, 2002
To: Goldstein, Jon W.
Subject: RE: $
Dear Char,
First, ask Bank of America what the new rate is on your CD if you choose to
roll it over. Now, be careful … rates haven fallen dramatically, so don’t
let anyone talk you into buying a longer-term CD that you want, just to
capture a higher yield (generally, the longer the maturity, the higher the
yield.)
Once you have their information, shop around a bit. Check the ads in
The Sun for special CD rates. Also, look into treasury bonds and
high-quality corporate bonds, as they might have better yields than a bank
CD.
Just remember, the fixed income market is very efficient … you don’t get
a high yield without taking on additional risk, so if something looks too
good to be true, it probably is!
> From: Goldstein, Jon W.
Sent: Tuesday, February 19, 2002
To: ‘Murray, Jonathan P.’
Subject: $
Thanks Jonathan.
Talk to you next week.
