Portfolio

It will soon be decision time for my wife, Georgina, and me. Four short-term certificates of deposit totaling 10 percent of our fixed-income portfolio will come due during the next four months. The fact that we have CDs has surprised some readers who expect a financial columnist to seek investments with the potential for higher returns. And Georgina and I do, with a significant chunk of our portfolio in low-cost, broadly diversified stock mutual funds. But we also diversify with fixed-income investments and are pleased with how our short-term CDs, all for 13 months or less and yielding between 5.2 percent and 5.8 percent a year, have stabilized our portfolio while providing dependable income.

The numbers game isn't adding up for average investors. Government data, corporate earnings, loan defaults, retail sales figures and Federal Reserve decisions often produce more fog than clarity about the future. Even former Fed Chairman Alan Greenspan contributed to this murky horizon. His book slams President Bush's lack of spending curbs and attributes the housing boom to lower long-term interest rates stemming from communism's fall. More important, he warns of the likelihood of higher rates in the future to thwart inflation.

As the stock market fell and concerns grew yesterday, all was quiet at many financial planning offices. "I'm the loneliest guy in town," said Kenneth R. Solow, chief investment officer at Pinnacle Advisory Group in Columbia. Solow's office helps 500 families invest their money, but as the news screamed of stock plunges and worst single-day performances since 2001, just two of his clients bothered to call in for reassurance. "The fact is that a one-day move tends to be smoothed out over a four-week period," said Solow, who has been counseling clients to expect a drop.

What should you do -- and not do -- with your money these days? Some suggestions: NEW ANGLE: European investments might now become more attractive because of the approaching currency union. The merging of currencies -- to be phased in starting in January 1999 -- encourages many overseas companies to restructure. Michael Metz, of CBC Oppenheimer Corp., says these closed-end foreign funds are appealing: France Growth Fund, Germany Fund, Italy Fund and Spain Fund, all traded on the New York Stock Exchange.

DEARBORN, Mich. -- Ford Motor Co. said yesterday that it would sell its business-equipment financing unit to Mellon Bank Corp. for about $1.7 billion.Mellon is acquiring a portfolio of $1.5 billion of leases, and it is paying a $200 million premium, the bank said.It's the latest step in Ford's effort to sell its nonautomotive finance operations. In May, it sold a rail-car leasing business and 20 percent of its consumer-finance unit, and last month it sold a portfolio of leases to BankAmerica Corp.

NEW YORK -- HAVE you looked at a chart of the Dow Jones industrial average since mid-1995? It traces a parabolic curve, says market analyst Joseph Granville.These curves rise at an angle that's increasingly violent and steep. They often show up in the price of individual stocks, but you rarely see them in a general market average.Which may be a relief, considering the aftermath of earlier parabolics. Japan's "bubble market" of 1988-1989 eventually surrendered 63 percent of its value. When the gold price broke in 1980, the bottom turned out to be 47 percent down.

The Rouse Co., largely hampered in previous efforts to bolster its $4.7 billion commercial real estate holdings through acquisitions, is negotiating to purchase the sizable property portfolio owned by the heirs of billionaire Howard R. Hughes Jr.The Howard Hughes Corp. portfolio -- encompassing 3.6 million square feet of office and industrial buildings, shopping malls and thousands of acres of undeveloped land in California and Nevada -- would mark Rouse's first major success in a three-year program aimed at augmenting its assets.

COLLEGE PARK -- The University of Maryland at College Park has given new meaning to the idea of hands-on experience: Graduate students were handed $250,000 of the business school's money to invest in the stock market.And they've made money -- $15,332.85 as of yesterday -- a return of 6.1 percent since last May, according to results to be released today. Excluding brokerage fees, the portfolio gained 7.8 percent.This isn't funny money; in fact, it represents a quarter of the cash in the business school's foundation, a million-dollar pool of private gifts from alumni, corporations and others.

I'VE GOT an idea for a modification to the North American Free Trade Agreement: We'll send Ross Perot to Mexico, and in return we'll give the Mexicans anything they want as the gift of a grateful nation.After Tuesday's NAFTA debate with Vice President Al Gore, Mr. Perot's career as a pundit without portfolio -- and without specifics -- should be over for good.During that 90 minutes, in a charmless version of his old cracker-barrel act, dogs didn't hunt, lines in the sand were drawn and the tooth fairy was mentioned twice.

NationsBank Corp. said yesterday that it will buy Chicago Research and Trading Group Ltd., one of the world's largest options and government bond trading firms, for $225 million in cash.CRT performs securities risk-management services for its clients, trading in so-called "derivatives," or products derived from underlying financial instruments or commodities, such as stocks, bonds, currencies and oil. Some common derivatives include options, futures and interest-rate swaps."On our own we can provide some of the complex products that our corporate customers need," said NationsBank Chairman and Chief Executive OfficerHugh L. McColl.

Many families could only stand by and watch as their 529 college savings accounts plunged along with the stock market last year. Their hands were tied by an Internal Revenue Service rule that allows account holders to change investments only once a year, or when they switch the account beneficiary. So, if they had made a change in their account early in the year - often the time families make adjustments - they were unable to act again as stocks tanked in the fall. But the IRS, which has been giving taxpayers leeway in other areas because of the severe recession, is doing the same for 529 college savings plans.

Last year was brutal for investors, but probably more so if you're a new retiree. Your nest egg could be significantly smaller today, just when you're starting to tap it. But before you get too discouraged and conclude that you'll have to go back to work, it's time to take a look at where you stand. Kirk Kinder, a financial planner in Bel Air, has been doing just that for some of his retired clients who lost 10 percent to 18 percent in their portfolios last year. These retirees, who usually make modest yearly withdrawals from their portfolios, will not have to change their lifestyle even after going through the worst stock market since the Depression, he says.

Q: Should we pay off our mortgage? We have five years and $40,000 to pay down at a mortgage rate of 4.7 percent. The monthly payment is $675. We are both 67 and retired with a monthly income between Social Security and pensions of around $4,300. We make the house payment directly from our portfolio, but the value has dropped from $480,000 in October 2007 to $270,000 at the end of October this year. Should we cash in our portfolio and pay off the mortgage? Should we withdraw only the amount needed to pay off the mortgage and leave the rest to recover?

The curse of having this job is that it's hard to go through any joyful occasion and not think about how it relates back to mutual funds. And so, on a gorgeous sunny Thursday as the Boston Celtics' drive-by rally was cruising the streets here, it was hard not to be inspired by the Celtics' worst-to-first championship turnaround and think that investors who have been feeling pinched can figure out a similar way to bring their portfolio to victory....

Timing is everything. And retiring in a bear market - or even something just flirting with bear status - couldn't be worse timing. Baltimore's T. Rowe Price Associates crunched some numbers to figure the impact of a bear market on retirement, after the S&P 500 index fell nearly 18 percent between October and March. Bear markets - usually defined as a 20 percent decline in the market - are never happy times for investors. But hitting one in the first five years of retirement can spell serious trouble down the road.

When the stock market goes through a crisis in confidence, so do ordinary investors. It's hard to have much faith in a financial plan when all of the news is bad. The standard advice is "Hang on, for dear life," which is the hardest advice to follow at a time when your investment mettle is being tested. While trading in and out of funds is frequently a recipe for disaster, there are moves that investors can make to improve their confidence and portfolio without blowing up the long-term returns that they supposedly surrender by giving up on a fund.

Investors' portfolios have endured some significant damage in recent months. Many domestic large-cap, mid-cap and small-cap growth funds have had double-digit declines. Scores of technology, telecommunications, natural resources and foreign funds have seen comparable drops. Meanwhile, money market fund assets have hit a record $3.303 trillion as investors flock to safer and more liquid assets. Although it may be tempting to avoid even looking at your portfolio, consider some repair work.

Here are two good ones from the mail bag: Fidelity offered to look at my investment portfolio for free, so I took them up on it. After taking all of my information and asking some questions, the young man who met me said that I have "a hole in small-caps and emerging markets." He offered suggestions to fix it that sounded good, but I don't know. I want to keep things simple and I'm doing OK and I like the way I have things now. I never heard of the funds he said I should buy before. ... How bad off am I, really, if there's "a hole in my small caps," whatever that is?

This year has been a wild ride for investors. The subprime mortgage crisis toppled CEOs and threatened the economy. Oil prices hit a record high. Gold surged to levels not seen since 1980. The dollar sank so low that New York's Fifth Avenue became the shopping destination for European bargain hunters. A roller-coaster stock market whiplashed portfolios. Next year may be just as topsy-turvy. That makes this a good time to review the lessons of 2007 so we don't repeat them in 2008. Among them: Know what you own. If you can take a single lesson away from the subprime mortgage mess, this is it. David Resler, chief economist at Nomura Securities International in New York, says many of the mortgage-related securities now underwater were created since the last recession.

State utility regulators begin debate today on proposals to scrap the way Maryland utilities buy electricity in favor of a more flexible system that some argue will eliminate price shocks like the one that hit consumers this past summer. The Public Service Commission hearings are the latest phase in a multipronged review of the state's deregulation laws that consumer advocates hope will lead to lower electricity prices. Gov. Martin O'Malley and lawmakers ordered the studies in response to outrage over a more than 70 percent rate increase for customers of Baltimore Gas and Electric Co. over the past two years.