Tax Deferred

Are tax-efficient funds important for investors?Jean and Joseph Wallman of Centerport, N.Y., think so. They expected to pay capital-gains taxes earned last year on shares they sold. But, retired and living on a pension and investments, they weren't ready to pay taxes for shares their fund manager sold.The result was a tax bill a few thousand dollars higher than expected."We weren't prepared to pay that much in tax," said Jean Wallman. "We had to sell other funds this year just to pay that tax, which means we will have more capital-gains taxes next year."

HERE'RE some data to guide you in making investments.STOCKS WIN BIG: From 1925 through 1997, stocks on average gained 11.02 percent a year (half growth, half dividends), bonds yielded 5.7 percent, Treasury bills 3.8 percent and the inflation rate rose 3.1 percent annually, according to Standard & Poor's Research.WILD SWINGS: Short-term interest rates have declined sharply in the past 18 years. In 1980, 90-day Treasury bills rates stood at 12.4 percent; in 1988, rates were 5.81 percent; in 1994, 2.98 percent; and last year, 5 percent.

New York -- It rarely makes sense to rearrange your finance just because the White House changes hands. You never know what a new president will do, or when he'll do it.We of the media interview the experts, who speculate. But the smart investor watches and waits. You should act only on what Bill Clinton specifically says he'll do, not on what observers hope, or fear, he'll do.zTC Here's the rundown of what we know now:* Taxes. After the flip-flop on read-my-lips, it's hard to trust any president on taxes.

PRESIDENT Bush's proposal to eliminate the income tax that investors pay on dividends has generated speculation about winners and losers. At first, it seemed as if the winners would be dividend-paying stocks, especially preferred shares that pay high dividends. Among the potential losers, it seemed, would be tax-free municipal bonds that would face new competition from stocks and 401(k) investors who would still have to pay income tax on reinvested dividends once they took money out of the plan.

When Congress finally hammered out a deal to balance the federal budget by 2002, Republicans and Democrats, eager to sweeten the sell to the public, threw in $152 billion in tax cuts over the same period, enough for both parties to claim bragging rights.The result: "These are the most dramatic changes we've seen since '86," said Arthur E. Flach, tax partner in Grant Thornton's Baltimore office.For the investor, the tax overhaul means financial planning may be in order. In all, the Taxpayer Relief Act of 1997 contains more than 100 provisions that jiggers the rules affecting everything from IRAs to estate taxes to capital-gains taxes to college tuition benefits.

MONEY MATTERS to consider over the weekend:GOOD ADVICE: "Stop worrying about interest rates and start fretting about earnings. When considering a stock for 1997, ask where the earnings growth will come from." (Worth, November.)CAUTION NOTE: "Government 'inflation-protection' bonds sure sound good. Too bad they're not. You give up too much yield for marginal inflation safety. You forfeit interest you would get from conventional Treasuries." (Investors Digest.)GRIN & BEAR IT: "On Oct. 19, 1987, when the Dow plunged 508 points, millions pulled money from the stock market."

When Bill Clinton says he's going to put the country first and politics-as-usual last, that's the moment to put up your guard. His latest switch -- from deficit hawk to tax-cut dove -- is packaged with promises that his administration will pay for its largess while Republicans will merely go on piling up the national debt. Don't believe it. The president's new "middle class bill of rights" is only slightly less irresponsible than the proposals coming out of exuberant GOP ranks.Let's look at the numbers.

Alice Bullwinkle has some advice for you. "Pay attention now; save money when April 15 rolls around," says the manager of personal financial counseling for the accounting firm of Ernst & -- Young in Denver.Who wants to think about taxes now? There are still about 90 days until the end of 1991. Time enough later.If you put it off, you may lose some advantages -- and some money -- when you file.Regardless of your income, anyone who files a tax return should do at least some simple planning.

Stocks started the week on an upbeat note yesterday although trading was quiet because of the Columbus Day holiday. The Dow Jones industrial average rose 8.67 points to close at 3,593.41.WORKPLACE WISDOM: "Marshall Field, founder of the Chicago department store that bears his name, once overheard one of his clerks arguing with a customer. He asked what was going on. 'I'm settling a complaint,' said the clerk. 'No, you're not,' said Field. 'Give the lady what she wants.' " (Bits & Pieces)HOPEFULLY HELPFUL: "Next time your children get a check or savings bond, give them a few dollars to spend right away.

The Dow Jones industrial average reached another record high yesterday -- its 34th peak this year -- rising 32.16 points to close at 4,476.55. The Dow opened 1995 at 3,834.44.As one local broker put it, "When IBM offered to acquire Lotus Development at almost double Lotus' share price, that surprise woke up the entire market."JUNE 6 JOURNAL: Beginning tomorrow, you must pay for your stock and bond purchases within three business days rather than five. Suggestion: For convenience, leave your securities with your broker in "street name."