Conference nyoss1::market_investing

    If you borrow from your insurance policy, your death benefit
    is reduced by that amount.  Also, since it is a variable policy, 
    your premiums won't be guaranteed.  I'm very leery of tieing life insurance
    to my rate of return in an investment.  You pick life insurance
    to guarantee an instant estate for your survivors, not to have it
    fluctuate with your bundled investment account.
    
    For the funds, personally I would have lost all credibility for
    these people just because they tried to get me into variable life.
    Why not just go to the janus fund yourself, pay no load and have
    a low mgmt. fee with no 12b-1 either.
    

    Looks like high complexity and added cost with no advantge.

(1) If you need life insurance, then buy the lowest cost life insurance
you can find that meets hour insurance needs. DO NOT think of it as an
"investment"; it is an expense.

    Note: I believe that there are some possible tax advantages to 
    universal life insurance as an investment.  There are notes in
    here that talk about them, I think.

(2) I can see absolutely NO reason to pay extra fees to have somebody
else distribute your investment among four different funds.  Deal directly
with the funds OR use SCHWAB, FIDLEITY, WHITE or one of the other brokers
who will keep multiple families of funds in a single account for you.

        It sounds like you have talked to a salesman, and you need
to talk to an advisor.  First, some observations of what's missing
from what you've described:

        - no mention of comfort levels.  An advisor will recommend
vehicles that you are comfortable with, not just what has shown a
good return.  IMHO, it's worth paying for a good night's sleep.
Are you comfortable with the various markets' ups-and-downs?

        - no mention of asset allocation.  A real strategy includes
a mix of growth stocks, income stocks, foreign stocks, bonds, cash,
and insurance.  This is the key to your investing roadmap!

        - goals.  What level of retirement income do you want?  Are
you planning any major purchases (second house), etc.?
                                                                                
A good advisor/planner should take all these things into account (maybe
they did--I'm just going by what you described)

So, here are some suggestions:
        Take one area at a time, and make one decision at a time.
Start with insurance so that, in the event something happens, your
spouse is provided for.  I agree with .2, insurance is primarily an
expense, so shop around for the right policy that covers this contingency.
The books should cover what level of insurance is right for you, so go
with what you're comfortable with.  Then, figure out what asset allocation
mix you want, and take each portion one at a time: find the best growth
fund, then find the best bond vehicle, and so on.  A will is also an 
important part of this plan too.

        If you want to work with an advisor, interview several before
you choose.  Ask questions, and listen for the ones who ask questions of
you before making recommendations.  Make sure that the advisor will keep
your information confidential: you are going to be telling him/her a lot
about you, so caution is warranted.

        Subscribe to the Wall Street Journal (if you don't already).
This is a good way to keep current on what your money is doing, why
it is doing it, and where else it could be doing something.  There are
other publications too, but I like the breadth and style of the WSJ.

        Don't panic.  This problem is a set of smaller problems that can
all be addressed in due time.  There's a cost for each move (commissions,
fees, etc.), so make your moves one step at a time.  Many strategies
work, and some do not: find one that you like, and go with it.

	Happy studying!

-Austin W

I also agree with the advice you've rec'd so far.  this really sounds like
a salesman job to me.  remember, he's not doing this because he really, really
wants to make sure you're happy, he's doing this to put food on his table.
this is the way that person makes money!

i started investing about 4 years ago when i was 25 or so... what i did was
start slow.  read the business section of your newspaper daily.  get the
wall street journal and read the C section... it has more numbers and data
on mutual funds than you can digest!  i use the varying daily stats to help
pick my next fund - i doa comparision of mgmt fees, return, rank, etc,etc
to find one that will work out.

also, read notes in here.  lots of people have posted similar notes in here
and you can read/learn from those.

you've already started with the 401(k)...
take the next step and buy a mutual fund or two.
be patient, and read,read,read,read.

>    If you borrow from your insurance policy, your death benefit
>    is reduced by that amount.  

    Not in this case.  I can borrow 90% of the net asset without affecting
    the death benefit.  For example, if I have $200,000 death benefit and
    my $28,800 has grown to $100,000 in assets, I can borrow $90,000 at
    1.25% but I can't borrow from the death benefit.  I can also turn the
    asset value into an annuity or whatever...

    >Also, since it is a variable policy,  your premiums won't be
    >guaranteed.  I'm very leery of tieing life insurance to my rate of
    >return in an investment.  

    My understanding is that the death benefit doesn't change.  Nor does
    the premium for buying the insurance (although I'll have to check since
    I didn't think of that question before).  But, my understanding is that
    this  vehicle was created to provide insurance AND a way to get
    tax-free returns on an investment that has historically produced much
    higher rates of return than a tax-free bond...

    >For the funds, personally I would have lost all credibility for
    >these people just because they tried to get me into variable life.
    >Why not just go to the janus fund yourself, pay no load and have
    >a low mgmt. fee with no 12b-1 either.

    >Note: I believe that there are some possible tax advantages to 
    >universal life insurance as an investment.  There are notes in
    >here that talk about them, I think.
    
    I called Fidelity this morning for their Investor Kit.  I also spoke to
    one of their Annuities people for information about that.  It turns out
    that they also have a Variable Life Policy but theirs is tax deferred,
    not tax free.  He admitted that if the asset value could be borrowed at
    1.25% tax free it was a great idea for an investment.  Their policy
    also reduces the death benefit if any money is borrowed.  
    
    So, I'm feeling a LITTLE better about the advice I got but I think I
    still want to talk to an independent advisor.  Even here in
    Minneapolis, the Investment Advisor section of the phone book covers a
    whole page.  How do people decide which one is a good one?
    
>(2) I can see absolutely NO reason to pay extra fees to have somebody
>else distribute your investment among four different funds.  Deal directly
>with the funds OR use SCHWAB, FIDLEITY, WHITE or one of the other brokers
>who will keep multiple families of funds in a single account for you.

    I'm presuming these companies are not advisors - that they just handle
    the transactions.  So, I need to know what I want before I walk into 
    one of these places?

>        It sounds like you have talked to a salesman, and you need
>to talk to an advisor.  First, some observations of what's missing
>from what you've described:
>
>        - no mention of comfort levels.  An advisor will recommend
>vehicles that you are comfortable with, not just what has shown a
>good return.  IMHO, it's worth paying for a good night's sleep.
>Are you comfortable with the various markets' ups-and-downs?

    Truthfully, the only things he's recommended so far are the 2 I
    described in .0.  They're a broker for the New England so...  Right now
    my comfort level is very low because I'm so ignorant.  The only cure I
    can see is to gain knowledge.  I don't think either my wife or I is
    comfortable enough to blindly follow a recommendation from an adviser
    without some additional research.  At least not yet when we're so new
    at this.

>        - no mention of asset allocation.  A real strategy includes
>a mix of growth stocks, income stocks, foreign stocks, bonds, cash,
>and insurance.  This is the key to your investing roadmap!

    I didn't put in the asset allocation, but he did go through all that
    for both items.  I just got lazy since there are 10 different funds
    used for the variable life and a bunch of different small cap stocks
    anf foreign stocks and such for the Star Advisor's Fund.

>A good advisor/planner should take all these things into account (maybe
>they did--I'm just going by what you described)

    We did a plan of our current position with information about what we
    wanted for retirement income, our personal level of risk tolerance, and
    such.  The two things he recommended were based on that I believe. 

>So, here are some suggestions:
    
    Thanks for the suggestions.  I like the idea of separating things out
    and handling them one-at-a-time.  Especially thanks for the "Don't
    panic"...  it seems a little overwhelming right now, and after all the
    conversations and seminars we're convinced that if we don't do
    something INSTANTLY we'll be spending our later years in a cardboard
    box living under the Hennepin Avenue bridge!
    
    Just out of curiousity, how useful is the information that comes with
    Quicken on CD?  Will it provide enought information as a teaching tool
    to be worth the $55?  I already have Quicken 3.0 on floppy so I'd be
    getting it specifically for the other information.
    
    >Happy studying!
    
    HAH!  I HATE being ignorant!  I almost liked it better when I knew so
    little I didn't know I needed to do something!

    re: -.1
    
   > We did a plan of our current position with information about what we
   > wanted for retirement income, our personal level of risk tolerance, and
   > such.  The two things he recommended were based on that I believe. 
    
    For retirement income, also consider IRAs. Gains are tax-deferred. 

>>(2) I can see absolutely NO reason to pay extra fees to have somebody
>>else distribute your investment among four different funds. ...
>
>    I'm presuming these companies are not advisors - that they just handle
>    the transactions.  So, I need to know what I want before I walk into 
>    one of these places?
      
      Load  fees,  including  so-called hidden loads, are not charged to
      cover the cost of providing you with advice.  They are used to pay
      for selling expenses, including sales commissions and advertising.
      YOU get no benefit from this.  (Unless you buy the  argument  that
      increased fund sales help you as an invester. -- I don't!)

      I  understand  that  you wand advice before you invest, but paying
      sales commissions is a poor way to get it.
          
          -  You  can  read  this  conference and get lots of advice for
          free. Some of it is good; some is worth the price charged. ;-)
          
          -  There  are  numerous newletters that will offer you advice.
          Many are discussed in this conference.
          
          -  The  American  Association  of  Individual Investors (AAII)
          offers a base newletter, a computerized investing  newsletter,
          home study and periodic seminars for reasonable fees.  AAII is
          also discused in this conference.
          
          -  If  you want an individual investment advisor, hire one and
          pay him/her for the services you want.
      
      In gerneral, its a little like insurance vs. investing -- keep the
      two things seperate.  You wan't to pay the lowest commissions  and
      sales charges that you can possibly find.  You want to buy and pay
      for advice seperately so that you know what  you  are  paying  and
      what  you  are  getting.  That way you can feel confident that the
      advisore is not motivated to recommend whatever pays  him/her  the
      largest sales commission.
      
      And  don't  sell  youself short!  With a little bit of reading and
      thinking you will come up with ideas that are as  good  or  better
      than those from many professional advisors.

Regarding .0, look at note 186.23:


       >4.  When you take out the loan, how does that affect the return 
       >    on the policy? 
       
               You earn the above quoted 9.22% on the money that is still
               in there (i.e. the money you didn't borrow).
       
               You earn 7% on the money that was borrowed.  So you can
               "borrow" it but never pay it back and keep receiving 7%.
               This was the part I found interesting and was the reason
               he was pushing this policy.
       
               But I think this 7% rate is subject to change, just like
               the 9.22% rate.
       
        
So - do not assume that the rate received is the same unless explicitly
stated in the contract. In general, walk into the insurance program with
a questioning mind. 

Above all else, do not assume ANYTHING unless explicitly put in
writing.

There an excellent book by Jane Bryant Quinn: Making the most of your
money in the 1990's.  It's about 1,000 pages of excellent material.

Gim

    Hi,
    Note 417 deals extensively with Variable Universal Life insurance. The
    most positive thing it says about it is that it might be an okay
    vehicle for providing insurance and some tax-deferred savings, provided
    you have already maxed out on IRA and 401K contributions.
    
    My wife and I recently had a couple meetings with a "financial advisor"
    whose firm purports to give investment advice but seems mainly to be a
    live insurance company. The company's name has "Investors" in it, which
    is a bit misleading. I was very turned off by the experience. He spent
    a great deal of time the first evening talking about our goals --short,
    long, and medium term -- and at first it seemed that he was going to
    give us a proposal containing a variety of vehicles to meet those
    goals. Instead, he came back in two weeks with six insurance policies,
    two each for me, my wife, and our newborn. The first was standard whole
    life insurance, the second was Variable Universal Life, which sounds
    like what was recommended to you.
    
    Several minor things contributed to my negative feeling. He ran
    estimates of the expected return of his VUL's, compared with a standard
    bank account at %5 interest (that sounds pretty good, actually :). I
    ran the computation myself, and noticed that the bank account interest
    was compounded annually, which decreases the yield considerably. A
    small item, but one which made me feel that I wasn't being dealt with
    squarely.
    
    Also, the cost of insurance seemed rather high. The agent tried to keep
    our attention on the "12% Rate of Return" column, but I think they are
    required by law to show you what happens with 0% rate of return. By
    comparing that column to your contributions, you can see how much the
    insurance component of the investment is costing. It seemed pretty
    substantial to me.
    
    Finally, I'm not sure on this point, but I *think* that if you die, you
    get your death benefit. Period. VUL gets around this by increasing your
    death benefit as your investment increases, so your whole investment
    value is covered; but in that case, the cost of insurance also rises,
    diminishing your returns.
    
    I would keep any sort of VUL low on my priority list. Try term or whole
    life for your insuarance needs, and shop for the best rates. For
    investment, the 401K is a good vehicle; it's tax-deferred, and DEC
    gives you a choice of funds. And as everyone else has said, study,
    study, study!
    			Good luck!
    				Jim B.

    re:-1 Exactly!  Go to the mall this weekend, go into a book store,
    go to the money section and look for books about how great insurance
    is as an investement vehicle.  There are NONE.  What you will find
    is book after book about avoiding life insurance as an investment -
    Jane Bryant Quinn, Givens, Ralph Nader, Consumer Reports, Wall St.
    Journal, BusinessWeek, Norman Dacey, and on and on and on.
    
    I'm really shocked that they are still projecting 12% in the cash
    value account after all the litigation and trouble Met is in right 
    now over selling life ins. as an investment.  Maybe you Wall St.
    Journal readers could post an article about the trouble with Met
    and life insurance selling.  Seems there in there almost every day.

    AAAAAAAAAAAAAAAAARRRRRRRRRRRRRRRRRRRGGGGGGGGGGGGGGGGGGHHHHHHHHHHHHHH!
    
    Well, I've (and my wife) continued to do research...  We went to
    another short seminar this morning - this one seemed pretty good, and
    explained more of the jargon, portfolio layouts, showed specific sample
    portfolios for low and medium risk investments, and a lot of stuff
    like that without getting mired in the "buy this" mess.  This is a
    company that does fee-based advising as well as managing portfolios for
    large investors.  They have no products of their own and simply buy
    whatever people want (who don't want to do their own buying) through
    Schwab.  Or, they'll work with you and suggest different vehicles, then
    you go off and do whatever you want.  
    
    They have both load and no-load funds they deal with and sounded pretty
    sensible about mixing growth, growth & income, international, income &
    balanced, equity, and bond funds into a portfolio to fit your risk
    tolerance, amount available to invest, and desired goals.  
    
    I also talked to an insurance salesman the other evening.  He differed
    SIGNIFICANTLY from the original adviser in that he can't see ANY reason
    for us to get any additional insurance with the possible exception of a
    small policy on my wife - burial insurance.  He suggested we not fool
    with insurance and just get into an investment program that would
    generate growth, income, and retirement.  He felt the idea of a
    $200,000 death benefit variable life policy was ludicrous.  So, if the
    insurance guy can't see any reason to sell us his product perhaps I
    should look elsewhere to spend my money!  :^)

    
    	Are you still searching? Has evrything closed out on this string?
    Let us know what is going on. Are you still at DEC? have some real
    easy suggestions for you. Almost no brainers, if you will, and you'll
    sleep nice and easy at night.
    
    		the Greyhawk

    Sorry to be so long, but I was on vacation (for a month), then I
    couldn't get to this conference for weeks.  I finally rummaged the
    EASYNET_NOTES conference and found out what to set this week's node
    name to!
    
    ANYHOW, we've done a goodly bit of work, went to a couple more SHORT
    seminars, and were on the point of going out and hiring someone to make
    recommendations when I found the latest version of Quicken...  which
    has a Fund Selector in the Deluxe version on CD.  So, I bought it (I
    was going to buy it anyway so this was just grave) and went through the
    process.  
    
    With the additional information, and some work at the library, through
    Barron's, and such we were able to get an asset allocation we're happy
    with, and a bunch or prospectuses (prospecti?).  
    
    So far we've scrapped the insurance idea - we'll buy some term
    insurance as needed but invest separately.
    
    We've been going through prospecti for different categories as
    recommended by our asset allocation - 50% growth, 25% international,
    20% government bond, 5% aggressive growth. I'm starting to enjoy the
    research, and we've learned a little about how things worked and gotten
    a lot more comfortable with the jargon...
    
    We limited ourselves to funds that had pretty low Beta (we're not real
    heavy gamblers) and had generally 5-star ratings from Morningstar.   In
    the different groups (so far we've only been through the aggressive and
    international) we're trying to get a diversification of aggressiveness
    - for example we'd pick an aggressive fund that invests in the Pacific
    Rim or East Asia and a more conservative fund that invests in large
    established companies in Europe, the Americas, and Asia.
    
    Unfortunately, all this has led to a new question - how MANY funds do
    you invest in?  For example, we narrowed down the international funds
    to 5 that are pretty different.  Of those my wife wants to invest in 4
    to widely spread the risk across various allocations and areas of the
    globe.  Using this as a guide, we'd wind up in somewhere between 10 and
    14 different funds!  I can provide more details about the specific
    funds if anyone is interested, but I'm curious how other people figure
    out how many funds in a particular segment of asset allocation is a
    good number!
    

    
    	Now we are getting somewhere.
    
    	Everything you have done to date is not only commendable, but the
    approach to success.
    
    	Just one small suggestion. Stick to one fund per category. Look
    at Beta as a volitility index (not a risk index), and focus on two
    VERY important areas:
    
    	One - pick a fund with a long-term track record under a single
    manager. One exception is most Fidelity funds which are really managed
    by committee. They all tend to hold the same things, just in varying
    degrees.
    
    	Two - make sure you are comfortable with the funds philosophy.
    If you are a value investor, you are not going to like funds that take
    momentum positions, etc.
    
    
    	Otherwise, have at it. Your ratios appear sound, although I might
    lessen stocks right now and have a little more cash. Remember stocks
    almost always drop in Feb-May depending on industry segment, so a
    little more cash may allow you to get some "good" buys later in the
    season. And, one more thing - be at the full 8% in your Digital 401(k)
    and treat that money exactly as in your fund ratios. You'll be much
    better balanced that way, although not as quick on your feet. I suggest
    the Windsor as your "balanced" fund with solid technology exposure and
    the Russell 2000 fund (I think its Fund D) as your OTC vehicle.
    
    	Good luck.
    
    		the Greyhawk
    

>    	Just one small suggestion. Stick to one fund per category. Look
>    at Beta as a volitility index (not a risk index), and focus on two
>    VERY important areas:
    
    A question...  Are you treating "International", "Growth", "Government
    Bond" as categories?  Or, would you have multiple funds in the
    international area that focus on different things?  Emerging asian
    markets for example as a separate category than worldwide holdings in
    large established companies?

    
    	Here's the rub...  The more you diversify, the harder it gets to
    beat the market averages. If you want true stock diversification, then
    just buy the Vanguard Index 500 fund and you are covered. Same applies
    to international funds, etc. That is why I avoid sector funds, they are
    to volitile and most difficult to call. And emerging nation funds I
    regard as very very risky, especially considering some of the premiums
    placed over NAV.
    
    	My investing categories are not types of funds, but types of risk;
    this works very well for me and eliminates most worrying. Yes, I may
    not be getting the *highest* return, but it is much more steady in the
    main, and often my high risk money will really kick in BIG gains
    because it is not my primary vehicle for capital appreciation; although
    it may only move my portfolio 5-6% points over time.
    
    	Hope this helps.
    
    			the Greyhawk

    Ahhh...  I like the idea of categorizing by type of risk.  That is what
    our asset allocation tries to do.  It looks like after lots of
    examination, looking at where different international funds have their
    money, amount of overlap, etc. - I've got my wife down to 2 funds!  One 
    will be an international fund that is widely spread through Europe, the
    Americas, and Japan; and one that concentrates on Asia without Japan -
    Hong Kong, Singapore, Malasia, Australia, etc...
    
    Gads, this is a bit time consuming, but its fun!  I'm off to the
    library tonite for a look at the latest Morningstar to help make the
    final choice of funds in this chunk!
    
    We've also decided on one fund in the very aggressive domestic area -
    I've forgotten the name but I believe its from PBHG...
    
    Then we repeat the process for the growth funds!  

    
    	Given the state of investing today, I may suggest a growth & income
    fund as opposed to just growth. You may also want to look at some
    closed end bond funds from Nuveen or Dreyfus and traded on the NYSE.
    They are trading at BIG discounts to NAV and look like real bargains
    over the next three years.
    
    	Good luck. Keep us appraised. I like PBHG Agressive Growth also.
    
    
    			the Greyhawk

    Still plugging along!  We've been doing some reading, investigating at
    the library, and we're now able to read and understand ALMOST
    everything on the Morningstar evaluation sheets!  We've narrowed our
    growth funds down to about 4, but I have to wait 'til I get back home
    from training to finally send checks out!  So far, it looks like it'll
    be from among the following:

    Crabbe Huson Special
    Fidelity Blue Chip Stock
    Strong Opportunity
    T. Rowe Price Growth Stock
    Franklin Balance Sheet Investment

    We may pick a couple that are in different segments "medium value" as
    opposed to "small growth" as opposed to "large blend" or other area... 
    This will be approximately 55% of what we're investing so we want to
    spread things a bit...  We figure we can always consolidate later if we
    don't like keeping an eye on 8 or 10 different funds.
    
    After this comes the gory government bond part!  Given the stories I'm
    reading in the papers these days - like today in USA Today "Will the
    Bond Nightmare Continue?" with a subtitle of "This is the bond market's
    1929" perhaps I'll just bury the rest of the money in the back yard!

    
    	Fidelity Blue Chip and Strong Opportunity are both excellent
    choices. You may want to get a little more agressive with something
    like Fidelity Select Electronics, or PBHG Emerging Growth, say 10%
    of assets on a three-year play.
    	As for bonds, it is almost impossible to lose with 2 year
    Treasuries today. The yield is near 8% and the term is too short to get
    burned. And 8% compounded twice is much better than a poke in the eye
    with a sharp stick :-)
    	BTW, go on more than just Morningstar. Cross reference with Lipper,
    Fortune and Business Week (both mags have special fund issues each
    year).
    	If you want to bond fund it - Try Strong Advantage, or Eaton Vance
    Short-Term Treasury. Both had modest up years in 1994 which says a
    lot about their management (as opposed to other people's).
    
    		the Greyhawk

    Well, once the dust settled, we wound up in the following growths:

    PBHG Growth
    Strong Opportunity
    Crabbe Huson Special
    T. Rowe Price Growth

    We're currently looking at technology sector funds, and the ones I like
    best so far are either the Investco Technology or the T. Rowe Price
    Science and Technology.  I've looked at the prospectuses, Morningstar,
    Value Line, and (something else in pulp magazine form that I forget)
    and I think I'll be sending a few bucks to the Price Science and
    Technology fund...
    
    BTW:  You're right about differing opinions...  I'm using Morningstar,
    and Value Line.  We also rummage the libraries selection of Money, and
    Barron's (ah, that's the pulp one from above that I couldn't
    remember)...  Frequently they ALL disagree!
    
    Gads, now onto Government Bonds...  Right now, the bond market seems so
    unfathomable that I'm leery of committing even for 2 years.  Maybe some
    of the ultra-short bonds for a start - 45 - 90 days?  I don't know yet,
    back to the library for some more books and new research...

    RE: -1
    
    At least 3 of those four growth funds look pretty good according to
    recent issues of Money and Schwab's SELECT list (5yr performance vs 
    peers).  But many of the big growth funds are heavily into technology - 
    last listing I saw for PBHG Growth was 30% in that sector.
    
    If your other growth funds are like that do you think a technology fund is
    redundant or risks overweighing you in one area?
    
    Dave

    
    	Have a quick hint on the technology sector. I play Fidelity Selects
    on Electronics (mostly semiconductor stocks) and the Merrill Lynch
    Technology B fund as my "specials" - and then look at Growth/Income
    funds like Strong Opportunity and Fidelity Contra to "round-out" the
    mix (both are more weighted to financials, manufacturing, etc).
    
    	If you want small caps then invest in a small cap fund on a regular
    basis (non tax sheltered) to maximize a buy and hold strategy.
    
    	While being a CPA seems to put one a leg-up these days on managing
    your own money, three basic rules can apply:
    
    	1) Growth stocks (buy and hold acquisitions) should be in a taxable
    	   account.
    
    	2) Income producing investments go into tax-sheltered vehicles
    
    	3) Foreign holdings go into taxable accounts to take advantage
    	   of foreign tax credits against earned income in the US.
    
    
    		Go for it - the Greyhawk

    re .22:
    
    >If your other growth funds are like that do you think a technology fund is
    >redundant or risks overweighing you in one area?
    
    Hmmm...  Could be.  I hadn't thought about it quite that way, but I'll 
    have to go back and review where the allocations are...  Thanks for the
    idea.