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, March 13, 2002
To: ‘Murray, Jonathan P.’
Subject: $
Hello, Jonathan,
Our first question today comes from someone looking for divine
intervention:
I’m 50 years old with 2 kids in college and basically no savings. I will
be able to start putting around $5,000 a year away. Any ideas or
miracles?
Mario
From: Murray, Jonathan P.
Sent: Tuesday, March 13, 2002
To: Goldstein, Jon W.
Subject: RE: $
Dear Mario,
Even though you are not starting your investment program
early, fear not — it’s never too late. Thanks to improvements in medicine and technology, we are all leading longer lives, so you will
likely be able to sock away a decent amount of money over the next 25
years.
With the wonders of compounding, your $5,000 per year in savings can
grow nicely.
I suggest starting with a safe, “slush fund” of monies that
you can tap in an emergency. They should be invested in very
conservative
instruments like money markets, short-term CDs and T Bills. Once you
have
done that, then add a conservative, balanced growth and income
fund — one that contains both bonds and stocks. Finally, after you have
built
this base, add a well-diversified growth fund to your portfolio.
Also, ask your mortgage company if you have built up any
equity in your home. If so, that represents a possible pool of money
that
you could tap if neccessary.
Remember, these are just suggestions.
Always consult a professional adviser to discuss your specific needs before
investing.
> From: Goldstein, Jon W.
Sent: Tuesday, March 13, 2002
To: ‘Murray, Jonathan P.’
Subject: $
I invested my 401(k) money in an annuity with the Janus Growth
Fund. This was over 7 years ago. Until recently, I was very pleased
with the results. I did not realize that Janus Growth held a large
portion of its fund in Enron.
Should I keep Janus or take my retirement and
invest it in another fund? I am 49, so I have some time before
retirement.
Thanks,
Carol
From: Murray, Jonathan P.
Sent: Tuesday, March 13, 2002
To: Goldstein, Jon W.
Subject: RE: $
Dear Carol,
Many investors put money with Janus during the go-go period of
technology stocks and IPOs. It was a great thing, for a while. Then, the bubble burst, as we all know, and funds like Janus Growth suffered.
While the fund may come back, it is rarely a good idea to have 100 percent of
your 401(k) assets in just one fund. Ask the annuity company what other
funds are available, and consider transferring a portion of the Janus
Growth (without fees or taxes) to some funds that do not correlate with
Growth, like a value fund, a bond fund, perhaps a small/midcap fund, or an
international fund. This should diversify your risk, and give you a
better
opportunity for enhanced performance, if Janus doesn’t do well.
> From: Goldstein, Jon W.
Sent: Tuesday, March 13, 2002
To: ‘Murray, Jonathan P.’
Subject: $
I want to know when is the best time to buy stocks? How long
should I keep the stock before selling?
Cleo
From: Murray, Jonathan P.
Sent: Tuesday, March 13, 2002
To: Goldstein, Jon W.
Subject: RE: $
Dear Cleo,
The first part of your question is easy: Now is always the best
time to buy stocks. Otherwise, you will always find a reason not to
invest. Believe me, I could list 10 reasons right now. But, if you
believe in the free markets, and the desire of human beings to improve
their
lives, stocks are the way to go, long term.
Sure, the markets can, and
will go down, but they have never stayed down.
The second part of your question is the toughie. It’s really
hard to know exactly when to sell a stock. However, I suggest that you
think
about selling under one of three scenarios: One, if the underlying
reason for your investment has changed (i.e., you were saving for a house
and
now you’ve purchased it); two, if the stock has hit your desired
price target (i.e., you wanted to double your money); or three, if the
fundamentals of the stock have changed (i.e., they sold off their most
profitable
business, or their CEO just retired, or the valuation of the stock has
become unattractive, etc.)
One of the difficult lessons investors
learned during the past two years is that there usually IS a time to
sell a
stock. A total “buy-and-hold” strategy doesn’t always make sense.
> From: Goldstein, Jon W.
Sent: Tuesday, March 13, 2002
To: ‘Murray, Jonathan P.’
Subject: $
Thanks, Jonathan.
Talk to you next week.
