By CNBC.com Staff 09/07/00 We have been seeing some of you post terrific questions on our message boards. CNBC.com took those questions to some of our contributors - and here is their response. Please continue to discuss topics on our boards. From time to time, we will take your questions to financial advisors, attorneys, analysts and other experts and post their advice.Q: Holly asked: I currently hold Vanguard Growth & Income and Vanguard Growth & Equity in my Roth IRA, should I have more diversity, or add an additional fund to this mix, any suggestions, I haven't made my 2000 contribution yet. A: You are off to a great start with a Large Cap Value Fund with Vanguard Growth & Income {VQNPX} and a Large Cap Growth Fund with Vanguard Growth Equity Fund {VGEQX}. Both funds have pretty good performance over the last few years. The next step would be to broaden your diversification by adding one or two more asset classes. The first asset class I would add is a Small Cap Growth Fund like Managers Special Equity {MGSEX} or Turner Small Cap Growth {TSCEX}. The next would be an International Fund such as Artisan International or Janus Overseas {JAOSX}. Once you add more funds, keep on eye on them to make sure they perform as expected. Also, you want to keep them balanced. That means if one fund does really well and is now 40 percent of your account, take some profits and add to the funds that aren’t doing quite as well. Keep making those contributions and make them as early in the year as possible. This is an incredible way to build for your future tax-free! Diahann W. Lassus, MBA, CFP®, CPA is Co-owner and President of Lassus Wherley & Associates, P.C., a Wealth Management Firm offering Fee-Only Financial Planning, Asset Management, and Tax Services. For more information, visit the company Web site at www.lassuswherley.com.Q: Brina asked: How much money should you save before you start investing in your 401(k)? A: We recommend a small cushion for current expenses and emergencies -
ideally three to six months - but that can be a big hurdle and you don’t want
to keep postponing your 401(k) participation. I recommend setting aside at least
enough cash to cover real emergencies such as a move, the car breaking down,
etc. Then invest as soon as you can in your company’s 401(k) plan. The money
compounds like a snowball going downhill. The deductions are pretax so you
won’t be "missing" as much from your paycheck. All of your 401(k)
funds should be invested in mutual funds and not in a money market account. And
remember, the younger you are, the more aggressive you should be. As a rule of
thumb, anyone under 50 can be 100 percent invested in stock funds. Q: SWA asked: I wish I knew more about life insurance. Are there any books that can help folks who don't want to give it all to the government? A: Life insurance should be viewed as a financial product you buy to help protect your family or your business if you're not around. Life insurance should be used to protect the loss of an income stream for dependents - if you don’t have dependents you probably don't need life insurance. Life insurance proceeds can pass to your heirs free of federal estate taxes but your heirs must own the policy on your life. If you own the policy, the proceeds become part of your estate even though they pass to the beneficiaries outside of probate and there could be estate taxes due on the proceeds. Life insurance also has some sophisticated purposes, such as providing an estate for your heirs, protection in a business partnership and liquidity in an estate where your heirs will need to use the life insurance proceeds to pay taxes on assets they may not want to sell - such as your business. The House and Senate have both passed bills that would phase out the federal estate tax. Clinton has vowed to veto it when it comes before him. Currently, if your estate is under $675,000, there will be no estate taxes due upon your death. That number is scheduled to increase to $1 million by 2006 - so even if we don’t get estate taxes abolished, you will be able to give away $1 million at death without a tax. A good book for you to review is Beyond
The Grave by Gerald Condon and Jeffrey Condon. |