Don't seek advice from strangers

Investing is serious business. No one wants to lose hard-earned dollars.

Sorting through the multitude of choices, understanding the benefits and risks

of each type of investment, deciding which are right for you, and then

monitoring their performance _ these tasks are not to be taken lightly.

So why do people expect strangers to be able to provide personal

financial advice in five minutes or less?

A woman inherited about $25,000 and wanted to invest in mutual funds

for the long term. To get the answers to her questions, she called a man giving

advice on a radio talk show.

The woman asked three reasonable questions:

1. Was the market too high to invest all her money now?

2. Would it be more sensible to dollar cost average, investing her money

in installments?

3. Should she put all the money in one fund or spread it among two

or more?

The man on the talk show had instant answers. He said the market

was not too high, and therefore the woman should not be afraid to invest all

her money now. The market could continue upward, making mutual fund

shares more expensive later, he said.

As for dollar cost averaging, the man didn't feel it was necessary. He said

this systematic form of investing serves two purposes: (1) It makes investors

feel more secure to dribble money into the market, and (2) It allows people

with small amounts of money to invest.

The man also advised the woman to put all the money in one fund _ but if

it made her feel better, she could divide the money among a couple of funds

she "liked."

This financial specialist knew nothing about the woman's age, years to

retirement, financial goals, income needs, or other investments. How did he

know these were the right answers for her?

His advice not to worry about the height of the market is generally

appropriate. No one can predict the best time to invest. More money has been lost

by investors who stayed out of the market fearing a downturn than by those

who went ahead and invested. Solid companies that earn money and pay

dividends have always proved to be good investments over the long term. Most

financial professionals agree, the best time to invest is when you have the money.

As for whether the woman should dollar cost average, that is a

personal decision. Dollar cost averaging may be appropriate if it would make her

feel more comfortable. The woman could avoid a commission with each

installment and obtain the discount usually allowed for lump sum deposits by

signing a letter of intent with the mutual fund.

Finally, suggesting the woman put all the money in one fund or find a

couple "she likes" is chancy. Unfortunately,

too many investors "like" the funds showing the biggest gains in recent

months. Typically, these funds also carry more risk.

Rather than picking a fund you "like," investigate a variety of funds

and choose only those that meet your financial objectives and risk parameters

before you even consider investing. Over the long term, mutual funds with a

consistent growth pattern often exceed riskier funds with erratic

performance. Allocating your money among several of these funds will minimize your

risks even further.

Again, these are general principles. There are as many ways to invest as

there are individual investors. Don't expect personal answers from the media.

They can only convey general guidelines that have proven successful over time.

For specific guidance, talk to a competent professional who takes the time to

understand your situation and goals.

CHRIS BRUNTZ is an investment representative for Edward Jones

financial services. His office is located at

111 1/2 E. North Bend Way, North Bend. He can be reached at (425) 831-5757.

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