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WALL STREET, CALIFORNIA: A SECOND LOOK AT MONEY MAKE-OVERS

Progress, Not Perfection

Investors Prove Personal Finance Is a Personal Thing

April 28, 1998|Helaine Olen and Lynda Natali and Graham Witherall | Helaine Olen, Lynda Natali and Graham Witherall are regular contributors to Money Make-over

With today's column, The Times, as it did in December, revisits six past Money Make-Over subjects to see how they responded to the advice they received from financial planners and whether they profited from it.

In looking at what each investor did--and did not do--some common themes appear.

Two people, for instance, had rather ambitious goals--for one, it was to afford a first home on L.A.'s Westside; for the other, to whittle down $45,000 in debt. Here, each has indeed made progress toward her goal.

For one single mother and one childless couple, all of whom earn good salaries and generally made good investment choices on their own, the main issue was as much a matter of attitude and finding the best approach toward what they have as of building security for the future.

To a second couple and another individual, however, the financial planners presented perhaps the toughest challenge: Change your ingrained habits--an almost irresponsible approach to money in one case, an excessively conservative investment course in the other--or be sorry down the road.

Easier said than done? Very much so, in their cases.

But for them, as for any investor, it's never too late to change further.

Free Spirit Takes First Finance-Savvy Steps

Kathy Harter now spends much of her free time eagerly reading about mutual funds, annuities and real estate investment trusts.

It's quite a change for the free-spirited Harter, 51, whose approach to personal finance sometimes bordered on the feckless. When she sought advice from Money Make-Over last spring, she had just moved to Honolulu and was seeking full-time employment.

Harter, whose one child is grown, has worked on a freelance basis as a writer and computer operator, relying on her parents' largess for half her income. She had little saved for retirement--indeed, she had put off thinking seriously about providing for her own financial future.

Her bond-heavy portfolio, worth an estimated $150,000, had been selected by her father. Two years ago, when he became too ill to keep advising her, as Harter put it last May, "I was losing more than a father, I was losing a safety net." Certified financial planner Phillip E. Cook of Torrance urged Harter to firm up her job situation and commit to a disciplined retirement saving plan as soon as possible.

The planner estimated that Harter would need to begin putting away $1,100 a month if she wants to retire with an annual income of $30,000 in today's dollars. Moreover, in Cook's estimation Harter had a portfolio suitable for a cautious retiree, not someone who needs her assets to grow. He advised her to place almost all of her holdings in domestic and international stock mutual funds. It was an aggressive suggestion for an investor of that age, but Cook believed it was called for given the lost investing time Harter would need to make up for.

Harter's employment situation remains shaky. She's working as an assistant to a Hawaii state legislator, but the position is temporary and scheduled to end next month. As a result, she's been unable to augment her retirement savings. In fact, she's had to dip into her savings over the last several months to make ends meet.

Harter was determined to become a more knowledgeable investor, however. She began reading financial newspapers and magazines and making alterations in her portfolio. As luck would have it, her first move was not an immediate success. Harter sold her utility company shares and placed the proceeds, about $9,000, in Fidelity Diversified International Fund (five-year average annual return: 16.8%), as Cook had suggested. But "the utility shares promptly went up and international fund promptly went down. It was sobering," Harter said, laughing.

But she soldiered onward, ultimately transferring close to $30,000 out of bond funds and into such investments as Fidelity Growth & Income Portfolio (five-year average annual return: 22.3%), Fidelity Equity Income Fund (five-year average annual return: 21%), Fidelity Balanced Fund (five-year average annual return: 11.6%) and Fidelity Advisor Institutional Growth Opportunities (five-year average annual return: 21.3%).

Those choices are somewhat more conservative than Cook recommended, however. And Harter has kept about $75,000 of her portfolio in U.S. Savings Bonds. "I know financially they aren't the best thing, but emotionally I need them. They are my backup rent money," she explained, adding: "I didn't go as far or as fast with aggressive growth as Phil recommended. I just got my feet wet."

HELAINE OLEN

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