Investing For The Long Haul - personal finance

Black Enterprise, Feb, 2000 by Derek T. Dingle

As you plot your mix of investments, figure out how much of your portfolio should be allocated to stocks by subtracting your age from 100%. For example, if you're 35, you should place 65% of your assets in stocks or stockbased mutual funds.

A great primer on how to develop an asset allocation model can be found in the book Getting Started in Stocks by Alvin D. Hall (John Wiley & Sons, $18.95). The four steps outlined in the book are: (1) determining the class of assets--stocks, bonds and cash equivalents; (2) determining the amount of money needed to invest in each class; (3) investing in specific securities based on your goals; and (4) the amount of money to be invested in each security (see chart).

Mutual funds represent one of the best ways to achieve portfolio diversity as well as professional management. Because of this, mutual fund assets have grown to $5 trillion and may grow to $10 trillion over the next few years. But what makes these vehicles so inviting to the lay investor like you is that they offer a range of funds to suit your investment philosophy, sector preference and risk tolerance level.

* Look for a way to invest on the cheap. To avoid paying broker fees, you can buy high-quality equities through direct stock purchase plans (DSPs) or dividend reinvestment plans (DRIPs), in which you buy stocks directly from a public company. You can buy into some DSPs and DRIPs on the Internet ("Direct Investing," August 1999). DSPs usually require a minimum investment of $250, but some companies waive the lump-sum fee if you use their automatic debit process. Through these plans, you can buy stock for as little as $50 a month. You can access DSPs through Netstock Direct at blackenterprise.com. In terms of buying affordable mutual funds, look for no-loads--funds that you can buy directly from the company and avoid upfront sales charges that typically range from 4% to 8%.

Beginning a full-fledged investment program will take discipline and dedication. Learn the basics and place your hard-earned dollars in a range of investments gradually. By doing so, you will stay focused on the road ahead and avoid obstacles that may cause costly accidents.

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You can get your copy of the BLACK ENTERPRISE Declaration of Financial Empowerment and the BLACK ENTERPRISE Wealth-Building Kit by calling the toll-free number 877-WEALTHY, or logging on to www.blackenterprise.com.