AFRAID TO pick individual stocks in this lofty market? Try tracking the stock market with an "index fund," a mutual fund that matches a popular stock average.
"The best-known index fund is Vanguard Index 500 Portfolio which tracks the S.& P. 500-stock index," says Kiplinger's Personal Finance Magazine, Jan., adding, "This year's return to November 1 was 29.2 percent, probably much higher now."
WHITHER WALL ST.? "Corporate earnings tend to double every five years. Double today's earnings at the same P/E, and DJ 10,000 by 2000 is a mathematical certainty." (U.S. Investment Report)
"We're cautious. While the Dow climbs and selected growth stocks follow, the market is running out of gas. The troops lag the generals, a classic market top symptom." (Cabot Market Letter)
Of about 50 comments I digested this week, two-thirds were optimistic.
PROVE IT: "Warning to taxpayers making sizable charity gifts: The IRS now wants hard evidence. To deduct a gift of $250 or more, you'll need a letter -- a canceled check won't do.
"But small sums you give regularly -- through payroll deductions or at church -- don't fall under the rule even if the total hits $250." (U.S. News & World Report, Dec. 18)
MARYLAND MEMOS: "Bet against inflation with bonds; they're on sale. We expect a major bond rally in 1996." (J. Michael Martin, Columbia financial planner)
"USF&G is in final stages of a sparkling turnaround. Management exited unprofitable businesses, cut employees 50 percent, tightened underwriting. With profits much improved, we recommend purchase." (United & Babson Report)
TAX TIP: "IRS is cracking down on cash transactions over $10,000. Businesses likely to be visited in an IRS cash audit: Antique, art, car and boat dealers, law firms, jewelers, Realtors, insurance agencies." (Clifton, Gunderson "Focus")
BALTIMORE BEAT: Eastern Savings five-year bank CDs are listed under "Yield Shopper" in Worth Magazine's "1996 Outlook."
"If you make charity gifts, a charitable remainder trust provides you with significant tax and other benefits." (Harry B. Gorfine Co.'s Dec. Tax Report which describes the strategy) Phone 539-5474 for your free copy.
TAKE THAT LOSS: Kiplinger Washington Letter suggests investors take long-term capital losses now because a pending tax bill says post-1995 sales require $2 of long-term loss to offset $1 of ordinary income, not dollar-for-dollar like now.
DECEMBER DIARY: Tonight, "Wall Street Week With Louis Rukeyser" looks at the telephone industry and its stocks.
"Since 1950, T-bills or bonds lost in every 20-year stretch, once inflation and taxes are figured in." (Sanford Bernstein research)
"When 1995 began with the Dow at 3836, some experts thought it would reach 4,000 this year -- none saw it topping 4,500." (Investors' Business Daily)
Preston Athey, Rowe Price Small Cap Value Fund manager, picks Electro Rent and Comarco stocks, in Worth Magazine's 1996 Investing Guide.
"The Fed will cut interest rates from 5.75 percent to 5.5, maybe lower, after Congress and Clinton reach a budget deal." (Shelby Davis, N.Y. Venture Fund)
LAST LINES: "If you're looking for 10 percent gains fast, play the 'January Effect.' " (Personal Finance) More on this next week.
"At their offering prices, initial public offerings [IPOs] are good investments, but generally they're quickly overpriced." (Prof. Jeremy Siegel, Wharton School)
"Best buy on a PC budget: more RAM [random access memory]. As computer programs become more complex, they need more RAM. Upgrade cost: about $200." (John Edwards, computer analyst)
"When you see a successful business, you know someone once made a courageous decision." (Peter Drucker, Reader's Digest, Jan.)
"Tuition, room and board at private colleges up 6 percent this year to $17,600. Public colleges also up 6 percent to $6,800." (CNBC News)
"A bad credit rating can cause rejection for auto and homeowners' insurance." (Wall Street Journal)