Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, December 19, 1994 TAG: 9412190023
SECTION: BUSINESS PAGE: A10 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
"Send cash," joked Tyler Pugh, senior vice president and Roanoke branch manager for Wheat First Butcher Singer.
If cash seems a little crass for Christmas, gifts of money can take other forms in a variety of sizes and prices. And money is a welcome gift for adults as well as children.
In lieu of giving cash, Pugh likes the idea of a growth mutual fund for children and younger people. "It represents a perfect vehicle," Pugh said, returning dividends and the potential for profits in capital gains.
Best of all, he said, it lends itself to small additions of money as future gifts for birthdays, graduations and Christmases to come.
William Nash, manager of the Roanoke office of Scott & Stringfellow Investment Corp., said he can't recommend purchase of a few shares of stock. And few people can afford to give 100 shares of a blue-chip stock.
If you buy two, three or four shares of stock with the idea of adding more later, he said, the commissions will add up rapidly. That's not a good expenditure.
Instead, he recommended a zero coupon Treasury bond, called a STRIP, especially if a youngster is involved.
A Treasury bond that will be worth $1,000 on Nov. 15, 2006, was selling last week at $403.90. Nash said that's a 7.76 percent yield, which is good in today's market. And it represents more than doubling of the money in just 12 years.
The fee for the Treasury bond includes the commission, he said.
The downside of a zero coupon bond is that taxes are due each year on the annual gain even though the payment isn't received until maturity. He advised buyers to get a breakdown from the broker at the time of purchasing the bond showing the accretion for each year. That way, Nash said, tax reporting is easier and no accumulated taxes will be due at maturity.
Richard Wertz, vice president at the Roanoke office of A.G. Edwards and Sons, offers his clients a choice between a growth mutual fund and a zero coupon bond timed to mature when a youngster enters college.
For a baby, he said, a bond could be timed to mature in 18 years when he or she enters college. Such a bond maturing at $1,000 in the year 2012 could be purchased last week for $249 at a yield of 7.9 percent.
The more remote the date of maturity, the cheaper the bond initially.
Wertz said most mutual funds charge about $500 as an initial payment. Subsequent contributions to the fund can range from $25 to $50.
If he had to choose a stock for a child, Wertz said, he would recommend Coca-Cola Co. which has been selling recently in the range of $50 to $60 a share.
Peter B. Milward, manager of the Roanoke office of J.C. Bradford, recommended several books as gifts for people who are interested in investing.
He likes two books written by Peter Lynch, former manager of Fidelity's Magellan Fund. They are "One Up on Wall Street" and "Beating the Street."
Milward is currently reading "The Warren Buffet Way," by Robert G. Hagstrom Jr., about the owner of Berkshire Hathaway, who is one of the world's most successful investors.
Anyone serious about investing in the stock market should read those books, Milward said.
U.S. Savings Bonds are perennial favorites as gifts of money.
Bonds sold now carry a minimum guarantee of 4 percent, but they earn market rates that change twice a year if they are held more than five years. The current rate is 5.92 percent.
One nice feature of U.S. Savings Bonds is the price. They can be purchased as cheaply as $25 for a $50 bond, and they are sold at most banks.
Bonds can be cashed tax-free if the money is used for direct college costs. To qualify for this tax break, the bonds must be in the name of the student's parents.
At Crestar Bank, you can buy American Express gift checks that include Christmas designs.
In addition to U.S. Savings Bonds, Crestar Bank will open savings accounts or certificates of deposit as custodial accounts as a gift for a child.
Most banks no longer carry uncirculated currency that can be used as crisp holiday tips, but a spokeswoman for Crestar said tellers will accommodate customers by finding bills in good condition.
Reg Luck of Roanoke Coin Exchange said the 1994 Silver Eagle coin is selling for $10 and up, depending on the packaging.
The coin shop at Towers Mall also is selling proof sets of four commemorative coins - women in the military, World War II, the Vietnam War and the Vietnam War Memorial. Luck said these sell in the range of $20 to $60.
Roanoke Coin Exchange is also selling new silver dollars plus some old silver dollars "like you used to get at the bank," Luck said. These coins sell for $10 and up, depending on their condition.
by CNB