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WALL STREET, CALIFORNIA | MONEY MAKE-OVER / LYNDA NATALI

Roamin' Type

A few new investments should get world traveler to her financial destination.

June 24, 1997|LYNDA NATALI | Lynda Natali is a freelance writer based in Savannah, Ga

Linda Boyd loves a good adventure.

An avid world traveler, she has picked a different country each year, then set off by herself to explore it. The itineraries for these monthlong excursions have included Indonesia, Turkey, Morocco, Greece, Singapore and Thailand, to name a few.

Three years ago, with nearly 40 countries to her credit, she ventured in a different direction. Boyd, at 43, became a single mother.

"Nobody could prepare you" for how motherhood changes your life, "or the joy it can bring you,"said Boyd, who is rearing her daughter, Taylor, now 3, without any support from the biological father. "It changes your entire world."

But with years of hard work and saving, she felt that she could comfortably take on single motherhood.

Not surprisingly, this same sense of adventure steered Boyd onto a more challenging financial path.

Indeed, she is within reach of her long-term financial goals, according to Sharon Rich, a fee-only certified financial planner based in Belmont, Mass. Boyd, 46, a program manager with Orange County who makes $74,000 a year, includes among her ambitions retiring early, providing a college education for Taylor and eventually getting back on the road.

"It really sticks out as a success," Rich said of her client. "I think her goals are very realistic."

At the core of Boyd's portfolio is $156,000 in mutual funds she accumulated over many years by consistently working, saving, reinvesting her returns and educating herself in order to make wise investment decisions.

Boyd took her first job right out of high school. She was 17 years old and made $1.97 an hour as a clerk for Orange County. She figured she would work for the county about a year, but she's still there.

As she advanced through the ranks, she put herself through college, going at night for 10 years to earn a bachelor's degree in business administration. During this time, most raises went directly into her deferred-compensation account--a tax-deferred pretax savings plan offered by her employer. In all, she tucked away upward of $625 a month in the account; it now has about $87,000 in it.

Some people must struggle to save even the smallest amount, but financial self-control comes naturally to her, Boyd said.

"I was a good saver as a child," she said. "It was never anything my parents did. I was just always willing to save my money and spend somebody else's."

She has accumulated an additional $45,000 in individual retirement accounts and $34,000 in other investments. She also has $5,000 in a bank savings account and $4,650 earmarked for Taylor's college education.

Boyd has chosen to put nearly all the money she's set aside, no matter the account or purpose, into no-load growth-stock mutual funds. That's a somewhat risky strategy, but over the last few years in particular, she has reaped the benefits of the booming stock market, bringing in annual returns of as much as 30% in some cases. For example, she has contributed only $46,000 to her deferred-compensation account--the rest reflects in large part increases in value in the mutual funds her contributions have been invested in.

Boyd's knowledge comes from classes at local community colleges and from reading financial periodicals.

"I look for a company that has solid management, a good performance record, is well-regarded by other experts and their prospectus is easy for me to understand," Boyd said. Once she narrows down the field of choices, she looks at which have had the best returns.

"I am willing to take more risks than some people--it is just my personality. Plus I am not too old to lose some."

Rich agreed with Boyd's strategy but said there are a few gaps that need closing, most notably a lack of foreign and small-company mutual funds. Rich suggested that to achieve better diversity, Boyd put $28,000 of her assets into international funds and $3,000 into small-cap funds.

"The U.S. has done well recently, but if you look over a long period of time there are many times in history when international funds have done better," Rich said. "That is why we are trying to split the bet."

To get the $28,000, Rich advised Boyd to take $10,000 out of Fidelity Equity-Income and $5,000 out of Fidelity Contrafund, two of the largest account holdings in her deferred-compensation plan; and $11,000 out of Neuberger & Berman Partners and $2,000 from Selected American Shares, both IRA investments. Boyd would remain invested in those funds, but they would no longer make up such a high percentage of her overall portfolio.

Rich suggested the money could go into some combination of Janus Overseas (less than 5 years old), Vanguard International Growth (five-year average annual return: 14.1%), USAA International (five-year average annual return: 13.9%) and Templeton Foreign Class I (five-year average annual return: 11.8%).

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