Purchase shares of firms that plan stock buybacks

The Ticker

July 19, 1996|By Julius Westheimer

Midsummer memos about your money:

"Here's a clever investment strategy: buying shares of companies that announce plans to buy back their own stock. Reason: These companies have excess cash and see their shares as a good investment.

"Prices typically rise since there are fewer remaining shares. The ideal time to buy: The months immediately following the media announcement.

"Some companies now buying back shares: Walt Disney, McDonald's and General Electric." (David Fried, editor, The Buyback Letter.)

WATCH IT GROW! "Your 401(k) can allow you to retire a millionaire. Example: A 25-year-old earning $30,000 a year who saves 10 percent of his or her salary and whose employer matches 50 percent of first 6 percent the employee puts in.

"Assuming 5 percent raises annually and only 6 percent return on investments, the person would end up with hefty $1.3 million by 65. At 8 percent, $1.9 million." (Money, June.) Many libraries have copies.

YOUNG AT HEART: Several readers have asked me to summarize "Things To Do Before Age 40," from an article in an old issue of Success magazine I mentioned many months ago:

"If you do the right things before 40, odds are they'll pay off after that watershed birthday. If you don't, you're headed for a bumpy ride.

"Before 40, learn everything you need to know about your business or profession. It's harder to learn after 40. After 40, successful people find better ways to do what they've already learned.

"Start putting away 'I quit' money. Nothing is more depressing than absolute dependency -- the realization that you can't quit or change careers. Put away enough for a year or two."

DON'T WORRY: "Don't insist on having stock certificates yourself -- keep your securities at a brokerage firm. Money and securities at a broker are insured by the Securities Investor Protection Corporation.

"You can't lose certificates that way and you can trade them more easily. Also, it's much easier to have the broker collect dividends and credit them to your account than to handle all the paperwork yourself." ("Investing For Dummies," by Eric Tyson, $19.99.)

LANDING THAT JOB: "When Looking For a Job, Do Your Homework First," advises Black Enterprise, July, in a worthwhile story. Excerpts: "Researching an industry can help your job search Access libraries and research institutes Join professional associations Read industry publications Attend conventions Reach out to experts -- investment bankers, sales professionals, etc. Surf the net; log on to company and industry Web sites."

WHERE JOBS ARE: Regarding the above, Lehman Bros. Research Department says, "If you're looking for a job, the strongest growth sectors today are computers, hotels, motels, leisure and recreation areas."

MONEY SAVER: "Save all your unbudgeted income. Whatever it is -- a gift from Great Aunt Nell, the $5 you won on a Lotto ticket, the refund you mailed away for. You will not miss what you have not put in your pocket to spend." ("The Cheap Report, A Guide to Frugal Living.")

TAX TALK: The Kiplinger Washington Letter recalls that in 1895 ("101 years ago; we missed the 100th anniversary") the Supreme Court ruled the income tax unconstitutional, even though there wasn't one then.

The letter adds that when the income tax first went into effect in 1913, the rate was 1 percent on the first $20,000 of taxable income -- the equivalent of about $308,000 today. And the top rate was 7 percent above $500,000, "considered highway robbery at the time."

JULY JOURNAL: "Demand that your broker pay attention to your account. Brokers focus more on clients who demand service than they do on clients who don't. The lesson is: If you're not a big wheel, be a squeaky one." (Money, July, in a good story, "Moneymaking Lessons From an Ex-Broker.")

"Buy extra copies of a particular issue of coupon-heavy newspapers when a paper publishes numerous coupons that you want to use." ("Money Smarts: Guide To Saving Money -- 325 Valuable Tips That Stretch Your Dollars," by David Scott.)

Freebie: "Eight Ways to Make $1 Million with Your 401(k) Plan." Send a stamped, self-addressed, business-sized envelope to National Association of 401(k) Investors, Box 410755K, Melbourne, Fla., 32941.

Pub Date: 7/19/96

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