HOW SHOULD you invest your money in 1998? Today, more thoughts between the holidays:
DON'T OVERLOOK STOCKS: "A $1 investment in large company stocks made on Dec. 1, 1925, increased by year-end 1996 over 1,000 times to $1,371, representing a compound annual return, including reinvested dividends, of 10.7 percent.
"That same $1 investment in government bonds grew to only $33.73 (5.1 percent) and Treasury bills to only $11.34 (3.7 percent). Inflation grew at only 3.1 percent annually." (Ibbotson Associates)
WHAT TO BUY: Standard & Poor's 1998 Annual Forecast issue includes these stocks in its "Master List of Recommended Issues for Long-Term Capital Appreciation": Abbott Laboratories, Boeing Co., Coca-Cola Co., Federal Home Loan Mortgage Corp., General Electric Co., Microsoft Corp., Intel Corp,, Merck & Co. and Procter & Gamble Co.
WHAT TO SELL: "Deciding which mutual funds to sell isn't complicated. Ask yourself which funds have disappointed you most over the last three years. Selling losers is the most tax-efficient way to raise cash.
"But before you sell, ask yourself whether the reasons you bought the fund are still valid. Then see if new data has come to light that suggests a change." (Michael Stolper, financial adviser)
HOW ABOUT MUNIS? "Alluring as Treasury bonds are," says Better Investing, "you may find tax-free municipal bonds even more attractive." The article explains that "munis" will benefit from low inflation and flat to falling interest rates. The story concludes, "Since municipal bond income is exempt from federal income taxes (and the state and local variety as well, if you reside in the issuing state), municipals could let you take more money to the bank -- and after all, that's what counts."
LOOKING AHEAD: "Santa Claus comes to Wall Street nearly every year at Christmas and brings a short, sweet, respectable rally. And historically, more Dow Jones points are in gained in January than in any other month." ("1998 Stock Trader's Almanac")
YEAR-ENDERS: After interviewing utility analysts, I feel the BGE-Pepco merger cancellation is not a minus for BGE. The local utility is considered a "low-cost producer," an especially valuable asset in times of utility deregulation.
"These are good times for bond investors, with historically high after-inflation returns and a good shot at capital gains." (Kiplinger's Personal Finance Magazine, January)
"Defer income into next year whenever possible, and accelerate deductions, unless you expect to be in a higher tax bracket in 1998." (Ed Mendlowitz, CPA)
Pub Date: 12/26/97