Investments

  All right, you've paid off all the bills, beaten the wolf back from the door to at least the porch steps, and you have some money left over. Now you're ready to talk to those guys who are calling you five or ten times a day to tell you what to do with it, right? Wrong. First, make sure you do the obvious little things, such as (if you haven't already done so) prepaying your IRA for 1986. You can earn the interest on $2000 ($4000 if married) tax free for a whole year by prepaying now. Next you have to think about ``your portfolio''.

Most of the paper peddlers who call you will consider your cash and tell you how to deploy it to ``meet your financial goals''. The cash will become a mix of investments which will be called ``your portfolio'' (as if you carried it around with you all the time--though in a sense you do by worrying about it). Unfortunately, they often ignore the other 90% of your net worth. What's that? Your stock in Autodesk. So remember that your portfolio is already invested 90% or more in a high-risk, high-tech company, so anybody who advises you to put any of your cash into similar stocks for ``aggressive growth'' is telling you to increase your concentration in this sector. What you probably want is to balance things by staying pretty conservative with where you put the cash, so be sure whoever is advising you understands the whole picture. The best book I've seen about portfolio balancing and evaluating different risk factors is called Inflation-Proofing Your Investments by Harry Browne. I do not agree with much of the advice and specific recommendations given in this book, but the sections on valuing differing kinds of holdings (equity in a house versus bank deposits versus shares you can't sell) are very well written and easy to follow.

You will probably be contacted by people who call themselves ``financial planners''. There are two kinds of people going by this name. Some prepare a plan from information you supply, for a fee. Most derive their income from commissions on specific products they recommend and then sell you. 'Nuff said.

If you're looking to stash the cash immediately in a safe place that generates income, I'd recommend Capital Preservation Fund, which I have used since 1978 and with which I have had absolutely no difficulties. They invest only in US Treasury Bills, which are generally considered the safest investment in the world. They also have a fund which is free of both California and Federal income taxes. You can write checks on either fund. (Again, I'm not telling you to put your money there, and they may run off to Paraguay with it tomorrow. But if they do, I'll lose a lot.)

Before getting involved in any investment other than ultra-safe short term things like T-Bills, it's worth spending some time learning just what the rules are and what all this stuff they're trying to sell you is. My favourite introduction to the game is a book called How to Buy Stocks by Louis Engel. I also like The Only Investment Guide You'll Ever Need by Andrew Tobias, but I like this book a lot less than some people do and consider it mistitled. I'd read it for background, but not advice.

I have a lot of other references and information about investments. You're welcome to borrow any of them. Most are in my office.