Safe places where you can park cash

The Ticker

August 26, 1998|By Julius Westheimer

Where do you park money if this stock market frightens you? Most people know the traditional havens -- bank accounts, CDs, short-term Treasury bills, etc. -- but many people may not realize there are less-well-known places for your "safe" money:

STASH CASH: "Park cash in money market mutual funds, not bank accounts," advises Peter Crane, a mutual fund writer. "These funds offer liquidity, more income than banks and stability of principal -- and they're the best places for money set aside for emergencies or held for long-term investments when the market steadies."

HAVEN: Another safe investment is in zero-coupon Treasury bonds. These are government IOUs which sell at a deep discount from maturity value. Although zeros provide no current income, your interest remains with your bond. If you buy zeros that mature when you need your money, you're guaranteed to get it all back, even if interest rates skyrocket.

WHY PAY TAXES? If you are in a high tax bracket, tax-free municipal bonds and funds make sense. Individual tax-frees have special advantages over funds: Your interest rate cannot change, you know your maturity date and you're guaranteed the full return of your money at maturity. Although bond funds are occasionally suitable, with bond funds you have no such guarantees.

For people in low tax brackets, high-quality corporate bonds are attractive.

BIG IS BEST: "While the Dow Jones average average has fallen 8.6 percent from its July 17 high, it was still up 8 percent for the year, through yesterday. And many widely held large stocks such as Merck & Co. Inc., General Electric Co. and IBM Corp. are up that much or more. That's a powerful indication that big investors still believe in America's largest companies' earning power." (Fortune, Sept. 7)

TOO LATE? If you want to buy "blue chip" stocks now, proceed cautiously. "It's hard to imagine prices of growth companies -- General Electric Co., Gillette Co., Intel Corp., Microsoft Corp. and others -- going much higher," warns Michael Stolper, stock adviser. "When our economy levels off, companies hypersensitive to business cycles will suffer major earnings contractions."

QUICKIES: "Recent Asian developments solidified the bullish case for bonds and pose a threat to stock markets. At some point there will be a great buying opportunity in Asian stocks, but for now it's too soon to make that call." (Bank Credit Analyst)

"There is a long-standing mantra that smaller company stocks grow faster than big ones. We may be rewriting the textbooks on that mantra." (James Paulsen, investment officer, Smart Money, September)

Pub Date: 8/26/98

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