Long-term rates may be headed even lower


THE KIPLINGER Washington Letter feels investors should figure on more slippage in long-term interest rates, with 30-year Treasury bonds sliding to 5.5 percent and fixed-rate mortgages to 6.8 percent. "Hard times in Asia are causing a flight of foreign money to the U.S., a safe haven. The Fed will remain on the sidelines for now and won't risk drawing more money out of Asia by raising rates," the newsletter says.

Some people buy stocks and stick with their hand.

Others like to trade frequently.

Is one method better than the other?

"Trading is hazardous to your health," says Moneypaper. "A study that researched trading records for 78,000 discount brokerage clients showed that from 1991 to 1996 the annual return was 15.3 percent. But the 20 percent of 'frequent trader' accounts -- more than 48 trades per year -- averaged only 10 percent. Thus, traders gave up more than one-third of what they might have made."

TROUBLE AHEAD? "People between 65 and 74 have historically been big sellers of stock, cashing in capital gains to cushion their finances in declining years. Don't count on new Baby Boomers to reverse this trend. With no help from the shrinking middle-age group, the bull market, then 25 years old, will grind to a halt." (Barron's.)

DOG HEAVEN: "The popular 'Dogs of the Dow' strategy makes equal investments annually in each of the 10 highest-yielding Dow Jones stocks. After one year the portfolio changes to reflect new yields. Over 25 years this strategy returned 16 percent a year (more than the Dow Jones industrial average or the S&P; 500.) But with the new tax law, it's wise to wait 18 months before selling except in tax-sheltered retirement accounts." (American Association of Investors Journal.)

DO BETTER: "Get More From Your 401(k)," says Money magazine: "Put in the maximum amount, which your employer sets as a percent of your salary up to the IRS $10,000 annual limit. Try not to spend your 401(k) balances when you change jobs; you'll pay a lot out in taxes, federal and state. Instead, roll the money into a self-directed IRA."

WISE MOVES: "The first step to financial independence is not picking stocks. It's paying yourself first. Write a check to your investment account when paying bills or have the money transferred automatically to your investment account." ("Taking Control of Your Financial Life.")

Pub Date: 6/19/98

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