Money In Stocks

My lovely daughter is a high school senior and about to enter college. My broker moved some of her college fund into bonds, but I'm wondering, with the markets as they have been lately, whether we should move a little bit more out of stocks. We have enough money in her fund to cover all four years. What would you suggest? Hear that whooping sound? That's the fire alarm that says, "Get out now!" It's been going off for some months now - and would have been whether or not the stock market tanked.

Should you bolt from your stocks and stock mutual funds? Perhaps you've been tempted as the stock market has plunged repeatedly since mid-July. Virtually everything you own - whether you invest in U.S. stocks or those overseas - has probably plunged during the past four weeks. The average mutual fund that invests in U.S. stocks has lost about 7 percent, and the average fund that invests around the world is down about 8.7 percent, according to Lipper Inc. Some analysts think the worst is over and investors will calm down as they see the end of missteps with exotic mortgage-related securities.

TODAY, we look both backward and ahead for clues to investment success.Every re-elected president since Andrew Jackson in 1832, except Ronald Reagan, witnessed a stock decline the next year. A 49 percent plunge followed Franklin Delano Roosevelt's 1936 second-term victory. Richard Nixon presided over a 45 percent drop.But history shows that most bull markets are killed by inflation, rising interest rates and earnings declines. Happily, we have none of those today. And the Dow Jones price-to-earnings ratio stands at a reasonable 18.In addition, baby boomers are putting more money in stocks than ever.

WITHIN FOUR years, investors went from crowing about their easy success in the stock market to being cowed by a bear market of the likes not seen since before World War II. It became all too clear, and too late for many, that a diversified portfolio of stocks, bonds and cash works better for small investors than betting their future on a few stocks in a single sector. Now that stocks have started to rally, the question is whether the lessons of the previous three years will stick through the next bull market.

HERE ARE recent stock market forecasts which may be useful for entrants in our 1998 Dow Jones contest.BULL RUN: A recent CNBC-NBC poll showed that 60 percent of those surveyed predicted that the Dow Jones average would end the year at 9,000 or better."

NEW YORK -- One of the bigger bears on Wall Street, Merrill Lynch & Co. chief investment strategist Charles Clough, will leave the largest U.S. brokerage firm at the end of the year, the company said yesterday.Clough, 57, will step down after 12 years at the brokerage to pursue other interests, said a Merrill spokeswoman. While the New York firm declined to comment, his latter years may have been less than harmonious."His overall bearishness has certainly soured people in Merrill who would have favored a more bullish outlook," said Marshall B. Front, a money manager for Chicago's Front, Barnett Associates LLC.Clough recently recommended that clients put 40 percent of their money in stocks, 55 percent in bonds and 5 percent in cash.

IN THIS volatile market, are you worried about your 40l(k) and other investments?"Every major study shows that asset allocation -- how your money is divided among stocks, bonds and money funds -- accounts for 90 percent of your long-term investment success," says Ted Benna, president of the 401(k) Association."In the weeks ahead, re-examine your mix. Aggressive investors should have 90 percent of their money in stocks, moderate investors 50 percent and conservative investors 20 percent. The balance should go into bonds, bond funds and money market funds."

WHAT ARE the main principles of investment success? Family Money, Sept.-Oct., runs a cover story, "The Only Things You Must Know To Make Money in Stocks." Summary: Systematic investing improves results dramatically. You develop discipline to stay in the market for the long term rather than pull out when it heads south. Most important: Don't put all your eggs in one basket because if your stock lags, you won't have others to offset your losses. Long-term, growth stocks are your surest bet. Companies with strong earnings growth are easier to spot than promising "value" stocks.

NOTES AND QUOTES from magazines, newsletters, etc., that piled up during a brief vacation:"Buy TIPS, or Treasury inflation-protected securities. They pay a fixed coupon, but their principal value is adjusted to the consumer price index." (Fortune)"Keep losses small, selling any stock where your loss exceeds 20 percent. Let your profits run." (Cabot Market Letter)"From 1990-1998 the annual large-firm CEO compensation rose from $1.8 million to $10.6 million -- almost a 500 percent increase."

Do you want to know how to make -- or lose -- money in stocks? From H. Bradlee Perry, former chairman, David L. Babson & Co., are ways to make money: Invest in established businesses with superior growth and profitability. Focus on high-quality companies, especially those with strong competitive positions. Concentrate on the long term. Be willing to go against the consensus. Diversify your holdings. Perrys ways to lose money: Buy the most popular stocks. Try to time the market. Become mesmerized by dividend yield.

My lovely daughter is a high school senior and about to enter college. My broker moved some of her college fund into bonds, but I'm wondering, with the markets as they have been lately, whether we should move a little bit more out of stocks. We have enough money in her fund to cover all four years. What would you suggest? Hear that whooping sound? That's the fire alarm that says, "Get out now!" It's been going off for some months now - and would have been whether or not the stock market tanked.

WHAT ARE the main principles of investment success? Family Money, Sept.-Oct., runs a cover story, "The Only Things You Must Know To Make Money in Stocks." Summary: Systematic investing improves results dramatically. You develop discipline to stay in the market for the long term rather than pull out when it heads south. Most important: Don't put all your eggs in one basket because if your stock lags, you won't have others to offset your losses. Long-term, growth stocks are your surest bet. Companies with strong earnings growth are easier to spot than promising "value" stocks.

Do you want to know how to make -- or lose -- money in stocks? From H. Bradlee Perry, former chairman, David L. Babson & Co., are ways to make money: Invest in established businesses with superior growth and profitability. Focus on high-quality companies, especially those with strong competitive positions. Concentrate on the long term. Be willing to go against the consensus. Diversify your holdings. Perrys ways to lose money: Buy the most popular stocks. Try to time the market. Become mesmerized by dividend yield.

"YOU CAN MAKE your child a millionaire," says Family Circle magazine, Feb. 15. "Let's say you give your 12-year-old weekly chores around the house: cleaning his or her room, taking out the garbage, doing the dishes, washing the car. In exchange, you pay your child $20 a week, or $1,040 a year. But instead of giving the money outright, put it in a Childhood IRA for your son or daughter." In a Childhood IRA that's invested in good growth mutual funds, and if the funds grow at an average rate of 10 percent annually, the child's IRA will be worth $16,575 in 10 years, the article says.

IN THIS volatile market, are you worried about your 40l(k) and other investments?"Every major study shows that asset allocation -- how your money is divided among stocks, bonds and money funds -- accounts for 90 percent of your long-term investment success," says Ted Benna, president of the 401(k) Association."In the weeks ahead, re-examine your mix. Aggressive investors should have 90 percent of their money in stocks, moderate investors 50 percent and conservative investors 20 percent. The balance should go into bonds, bond funds and money market funds."

NOTES AND QUOTES from magazines, newsletters, etc., that piled up during a brief vacation:"Buy TIPS, or Treasury inflation-protected securities. They pay a fixed coupon, but their principal value is adjusted to the consumer price index." (Fortune)"Keep losses small, selling any stock where your loss exceeds 20 percent. Let your profits run." (Cabot Market Letter)"From 1990-1998 the annual large-firm CEO compensation rose from $1.8 million to $10.6 million -- almost a 500 percent increase."

"YOU CAN MAKE your child a millionaire," says Family Circle magazine, Feb. 15. "Let's say you give your 12-year-old weekly chores around the house: cleaning his or her room, taking out the garbage, doing the dishes, washing the car. In exchange, you pay your child $20 a week, or $1,040 a year. But instead of giving the money outright, put it in a Childhood IRA for your son or daughter." In a Childhood IRA that's invested in good growth mutual funds, and if the funds grow at an average rate of 10 percent annually, the child's IRA will be worth $16,575 in 10 years, the article says.

PEOPLE OFTEN ask how quickly their children's money will grow if invested in this stock market.MODEST START: "If a 10-year-old sets aside just $16 a month (perhaps with help from parents or grandparents) in a stock or mutual fund," says Dick Davis Digest, "and the youngster keeps it up for 50 years, he or she will have over $277,000 at age 60, assuming an average annual return of 10 percent -- just under the 10.2 percent average annual stock returns over the past 69 years. Amazing fact is that the 10-year-old invested only $9,600 over those 50 years to amass over a quarter-million dollars."

NEW YORK -- One of the bigger bears on Wall Street, Merrill Lynch & Co. chief investment strategist Charles Clough, will leave the largest U.S. brokerage firm at the end of the year, the company said yesterday.Clough, 57, will step down after 12 years at the brokerage to pursue other interests, said a Merrill spokeswoman. While the New York firm declined to comment, his latter years may have been less than harmonious."His overall bearishness has certainly soured people in Merrill who would have favored a more bullish outlook," said Marshall B. Front, a money manager for Chicago's Front, Barnett Associates LLC.Clough recently recommended that clients put 40 percent of their money in stocks, 55 percent in bonds and 5 percent in cash.

PEOPLE OFTEN ask how quickly their children's money will grow if invested in this stock market.MODEST START: "If a 10-year-old sets aside just $16 a month (perhaps with help from parents or grandparents) in a stock or mutual fund," says Dick Davis Digest, "and the youngster keeps it up for 50 years, he or she will have over $277,000 at age 60, assuming an average annual return of 10 percent -- just under the 10.2 percent average annual stock returns over the past 69 years. Amazing fact is that the 10-year-old invested only $9,600 over those 50 years to amass over a quarter-million dollars."