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After the big shot - financial advice for Don Calhoun, who won $1 million in basketball shooting contest - 1993 Money Management Guide

Black Enterprise, Oct, 1993 by Carolyn M. Brown

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A convenient parking spot for college savings is a custodial account. Under the Uniform Gifts to Minors Act, Calhoun can give his son up to $10,000 a year and avoid any federal gift taxes. And as trustee, Calhoun would have access to the money.

Any earnings above and beyond $1,200 will be taxed at Calhoun's marginal tax rate. Once Clarence reaches 14, the "kiddie tax" kicks in at 15%.

* Devise a will. Calhoun desperately needs a will, particularly to ensure that Clarence inherits his prize money in the event of his death. Should Calhoun die without a will, his winnings would go to the State of Illinois.

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* Get a retirement plan in gear. Since he isn't working, Calhoun can't benefit from the two most popular plans: individual retirement account (IRA) and 401 (k). His choices are very limited. He can get a tax-deferred variable annuity. Or he can wait until he starts his business and open up an IRA, Keogh or SEP (Simplified Employee Pension) plan. in 35 years, even $425.31 invested annually at 9% interest would accumulate to $100,000.

Calhoun can always redeem his mutual fund shares to raise the necessary capital for any business enterprise. But ideally, he shouldn't have to touch the money. Calhoun, says Ross, needs to "keep his portfolio simple, liquid and growing."

PEGGY FORBES, WOODFORD CAPITAL MANAGEMENT

Hefty fees and commissions can eat up as much as 8% of an investor's pot. Therefore, Calhoun needs to be very mindful of where he puts his stash, says Peggy Forbes, president and chief investment officer of Woodford Capital Management Inc., a New York-based investment advisory firm.

One way he can avoid charges is to buy Treasuries directly from the Federal Reserve. Treasuries are a safe bet, says Forbes, since today's environment for bonds with interest rate uncertainty is a treacherous one. Another benefit Interest earned is free from state and local taxes. As new money comes in, Calhoun can start to play with different investments - from small cap stocks to blue chips to foreign funds. This way his portfolio can brace changes in market cycles.

JOHN ROGERS, ARIEL CAPITAL MANAGEMENT

A good device for new investors to grow their savings is mutual funds. The right mix of stock funds and a bond fund will manage Calhoun's money safely and profitably, says John W. Rogers Jr., president and chairman of Ariel Capital Management Inc., a Chicago full-service asset management firm.

Rogers'top choices are: The Yacktman Fund and The Strong Opportunity Fund. These funds take into account Calhoun's low tolerance for risk and today's slightly overpriced market. Yacktman (800-525-8258; min. investment, $5,000) looks for undervalued stocks with promising product lines. Strong Opportunity (800-368-3863; min. investment, $1,000) picks shares in undervalued small to mid-sized companies that are selling cheaply relative to their market values.

EDDIE BROWN, BROWN CAPITAL MANAGEMENT

Before Calhoun embarks on an investment program, he must set up a realistic personal budget and live by it without changing his lifestyle, says Eddie Brown, president and chief investment officer of Baltimore-based Brown Capital Management Inc.

After the big shot - financial advice for Don Calhoun, who won $1 million in basketball shooting contest - 1993 Money Management Guide

Black Enterprise, Oct, 1993 by Carolyn M. Brown

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