January 24th, 2008 by monies
“Yes,” says the latest S&P Outlook. The publication states, “Each of the following stocks posted a total return (gain plus income) of at least 45 percent from March 2000 through March 2003 versus a decline of more than 40 percent for the S&P 500 stock index.”
The list includes, with three-year total return percentages in parentheses: AmSurg (up 61 percent), Apollo Group (62 percent), Career Education (78 percent), Reebok (55 percent), Rent-A-Center (54 percent), St. Jude Medical (53 percent), U.S. Physical Therapy (59 percent), and UnitedHealth Group (49 percent).
Worth the risk?
“The average junk bond yield is now 12.5 percent while Treasury bond yields are at low levels,” says Smart Money magazine. “Thus, the yield spread is the greatest it has ever been, except for 1990 and 2000, suggesting that junk bonds are now undervalued.”
“The default rate, which hit 11 percent last year, is now down to 8 percent. The stronger companies have survived, so the default rate may continue to fall. If the U.S. economy stabilizes, junk bonds could be one of this year’s top-performing asset classes.”
Good math
“There are investors who choose to believe that the fees charged for managing a mutual fund involve money shareholders weren’t entitled to in the first place,” says a Vanguard mutual fund ad. The text goes on, “The truth is, it’s all yours and the impact of fees on performance over time can be significant.
“Take a hypothetical fund with an expense ratio of 1.3 percent versus one with an expense ratio of just 0.3 percent. Applied to an investment of $5,000, with subsequent annual investments of $5,000 returning 8 percent, compounded over 20 years, and the difference adds up to $28,194 in your account.”
April showers
“If there was ever a time to dump stocks, it was in 2000 or 2001 or the fall of 2002 — not now.” (Kiplinger’s Personal Finance Magazine)
“Homeowner’s insurance may be especially important today, after years of soaring prices. You should be sure that you have a ‘replacement cost’ policy rather than an ‘actual cash value’ policy. Although a replacement cost policy will cost more, it’s well worth the extra outlay.” (Physicians Financial News)
“Even with the federal tax exemption, 529 college savings plans may not be for everyone. They’re ideal for people with young children who probably will go to college. People with older children in a low tax bracket won’t get as much out of these plans, so it may not make sense to put money there and give up control.” (Financial Planning)
“If you can’t raise salaries, try handing out new job titles. Sometimes it even works.” (Wall Street Journal)
“Buy stocks when brokers’ offices are empty and their phones aren’t ringing.” (My father, a New York Stock Exchange member many decades ago).
Julius Westheimer is special managing director of the Westheimer Group, Ferris, Baker Watts. His column, Julius Westheimer’s MoneyWi, is published Wednesday and Saturday in The Daily Record. To ask Westheimer a question, log on to the Ask Westy! page.
Author: Julius Westheimer