Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, September 13, 1993 TAG: 9309130009
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
Five Roanoke investment advisers all chose a mutual fund, assuming that the saver with $1,000 to invest is probably young and intends to hold the surplus money for at least five years.
However, each recommended a different type of mutual fund.
A mutual fund has obvious advantages for the person with a $1,000.
Mutual funds will accept that amount, and some even take smaller sums to open an account. Then you can add to the fund routinely, perhaps as often as monthly, in amounts as small as $25.
They are liquid. That means you can get your money back any time you really need it, usually by calling a toll-free number.
Finally, a mutual fund offers the diversification that everyone needs but cannot otherwise buy for $1,000.
Every year, the Roanoke Times & World-News asks local brokers and financial planners for advice for small investors. Here is this year's advice from the experts on handling that $1,000:
Richard Wertz, vice president at A.G. Edwards & Sons, recommended an aggressive growth fund for a person with time to ride out its volatility in the hope of high appreciation.
He suggested a fund such as Growth Fund of American or Massachusetts Emerging Growth Fund.
A young investor should always go for long-term growth, he said.
Lindsey Quesinberry, investment vice president at J.C. Bradford & Co., suggested an international stock fund.
Such funds invest entirely in securities outside the United States, compared to a global fund that puts money into all countries, including the United States.
He would "take a little bit of a chance with $1,000."
Quesinberry believes that small domestic stocks have already run up to a high value, while foreign markets have lagged recently.
Even in the United States, he would prefer the stocks of small outfits over big companies.
Interest rates still are dropping overseas, he said. He believes that foreign growth will be very strong after other countries follow the United States out of a recession.
William Nash, manager at Scott & Stringfellow Investment Corp., urges a more conservative approach for anyone with only $1,000 to invest.
Nash would buy a good balanced fund, a type of mutual that is balanced between stocks and bonds. Such funds reach for both income and appreciation.
He opposes investing at a single shot. He would put $500 into the fund right away, then invest the other half after 60 to 90 days. This takes advantage of dollar cost averaging, which spreads the cost by buying in both high and low markets.
He would stick to a single fund, however. Unless you have a whole lot of money, he said, you need not diversify beyond the fund itself.
John C. Parrott II, a certified financial planner with Wheat First Securities, said he assumed that a person with $1,000 would need income more than appreciation.
On that assumption, Parrott said he would do one of two things with the money.
His first option would be a mutual fund of short-term bonds. He would choose one with bond maturities of about two years.
Parrott's second choice would be a bank certificate of deposit for a short term - no more than six months - in case rates start rising by then.
Steve Bowery, a vice president at First Union Capital Management Group, prefers a stock fund because stocks have a record of superior growth over time.
Bowery said investors should analyze information in the publication "Morningstar," which evaluates more than 3,000 mutual funds. It is available at the public library.
Because it's difficult to invest in more than one fund with only $1,000 - most have minimums of that amount - Bowery would seek out a general fund rather than one specializing in a particular niche of the market.
"It is our opinion that funds emphasizing `value' characteristics and with overweighting in industrial [metals, chemicals] and financial stocks [banks, insurance companies] will offer the best relative performance during the next one to three years," he said.
Three that meet those parameters, he said, include First Union Value Portfolio (sold by his banking company), Janus Fund and Scudder Growth and Income Fund.
The key to making the investment grow faster, he said, is to reinvest all income from the fund back into the plan.
Bowery also recommended purchasing additional fund units on a regularly scheduled basis.
by CNB