Timely advice for big winners of el Gordo play


December 31, 1992|By Julius Westheimer

For the comparatively few el Gordo big winners last weekend, we offer investment advice below. But unlike thousands of disappointed el Gordo players, stock market investors yesterday were generally happy. Reversing Tuesday's sharp drop, the Dow Jones industrial average climbed 10 1/4 points, to close at 3,321.10, with broader indexes also moving higher.

EL GORDO GUIDELINES: If you won any el Gordo prize, whether a small one or the $10 million grand prize, here are my recommendations:

(1) Put some winnings in a safe place, like a short-term CD to come due just before tax time, to be used for federal and state income taxes.

(2) Give some winnings to charity. Since you've been very lucky, share some of your luck.

(3) Pay off or pay down your mortgage, car loans and any other debts. Why pay high interest on a mortgage when you don't have to any more? (4) With the rest, find a financial professional with a demonstrated success record.

If you asked my advice, I would recommend in general -- the specifics to depend on your age and risk tolerance -- that you follow time-tested principles of investment:simplicity, diversification and high-quality securities.

Specifically, put 10 percent in a money fund for safety and liquidity, 5 percent in gold coins for emergencies, 40 percent in government bonds or tax-free bonds (depending on your tax bracket), 40 percent in high-quality stocks and/or stock mutual funds for growth and inflation protection and -- spend the remaining 5 percent! Money is to enjoy, and it's later than you think!

Speaking of stocks, consider such categories in 1993 as discount retailers, money-center banks, municipal bond insurance firms, disability and health insurance firms, paging service firms, cable TV networks, etc.

BALTIMORE BEAT: Greta Marshall, Louis Holland, Laszlo Birinyi

and I will appear in formal dress on the coast-to-coast year-end "Wall Street Week With Louis Rukeyser" show tomorrow, 8:30 p.m., on Channels 22 and 67. . . . "IBM stock isn't the world's best investment any more, but at this point it may be a good speculation." (David Nelson, Investment Counselors of Maryland). . . U.S. Surgical stock, widely held in this area, appears under "Rapid Growth Stocks" in S&P Outlook, Dec. 23. Other listed stocks include Food Lion, Merck and Philip Morris, all off substantially from their 1992 highs . . . Local stocks reaching new yearly highs this week include GEICO, Laurel Bancorp and Loyola Capital.

MARYLAND MEMOS: "One of the easiest, safest and most efficient ways to invest in stocks, bonds or mutual funds is through automatic investing, often called dollar-cost averaging. You buy a fixed amount of securities on a regular basis." ("The Corbyn Exchange," by Richard Hynson, managing director; phone him at 823-1200 for your free copy) . . . Money magazine, January, lists the T. Rowe Price New Asia fund under "International Category: Small-Stock Funds Star Among Our Selected Categories." . . . The same issue lists Provident Bank under "Leading Home-Equity Lines in the Largest Metro Areas," First Advantage Mortgage Co. under "Leading 30-Year Adjustable-Rate Mortgages" and Bank of Baltimore under "Leading 30-Year Fixed-Rate Mortgages."

LOOKING AHEAD: Beginning tomorrow, your employer will withhold 20 percent of most pension distributions for taxes unless you instruct the firm to deposit money directly into your IRA or another company plan . . . "With the economy picking up some steam, a bullish stance seems proper, short term. This market has one more upside thrust in reserve -- to the 3,600-3,700 area on the Dow Jones industrial average." (Smart Money, Jan.) One year ago, Smart Money said, "At Dow 2,908 today we feel the Federal Reserve has enough ammunition left to boost the Dow average into the 3,300-3450 range." . . . "My three-part argument against buying stocks now rests on higher interest rates ahead, stocks are grossly overvalued and the rising tide of new issues." (Martin Weiss, Money & Markets) . . . In next Tuesday's Ticker, we'll publish names of winners in our 1992 Dow Jones forecasting contest. Happy New Year to all!

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