Buy a Stock, Not a Lottery Ticket: Sal Mannino

The Feminine Face of Finance: Michele Wink

Women and Money — The Legal Terrain: Elaine Britt

Deciphering Financial Statements: John A. Tracy

Online Financing

Where Self-Help and Money Intersect

Rutgers Online

Investment Seminars

Corrections or additions?

Published in U.S. 1 Newspaper on May 10, 2000. All rights

reserved.

Facets of Financial Planning

Top Of Page
Buy a Stock, Not a Lottery Ticket: Sal Mannino

Buy and hold — invest for the long-term — says

Sal Mannino, an investor with Edward Jones in New Hope

(www.edwardjones.com , 215-865-5205). "Don’t try to time the

market," he says. "Stocks

are not lottery tickets. They’re real companies. Buying a stock just

because it’s going up is never a good reason."

On Thursday, May 11, Mannino presents "Mutual Funds 101,"

at 7 p.m. ($39), and on Thursday, May 18, he presents "Build Your

Portfolio on $25 a Month," at 7 p.m. Call 609-688-0800.

A radio personality who gives a stock report twice a day on WDVR,

Mannino has been with Edward Jones, a full-service financial firm

with over 5,000 offices, for four years. He learned most of what he

knows about investing from his father. "My father told me that

when you’re buying a stock, you’re buying a business, not a lottery

ticket," says Mannino. "What drives a company’s stock price

over the long-term is earnings."

Whether you put your money in stocks or in CDs depends on your goals,

says Mannino, and your ability to take risks. Everybody is unique.

"Even when everything is equal — age and income — you

may have very different portfolios," says Mannino. "The

objective

for a lot of people is a comfortable retirement. We’ve all come to

the realization that Social Security is not enough and we’re all

scared.

For a person in their 40s, it hits them like a ton of bricks. About

70 percent of our retirement will have to come from IRAs and

401ks."

Return and risk go hand-in-hand, so in the long-term stocks are the

most profitable investment. Nonetheless, there are many reasons to

diversify your holdings. "Nobody should have all of their money

in stocks," says Mannino. "The right balance is different

for everyone. It depends on your goals and your own ability for risk.

If you put all your money in the stock market, but you needed all

of that money in six months, there’s a good chance that there’s going

to be less than that in six months."

For the short-term, Mannino suggests putting money away in a money

market account. "A money market is like a high-interest bearing

checking account," he says. "It’s rainy day money. If the

furnace blows up, the roof leaks, that’s what it’s there for. It’s

your cushion. People should have three to six months’ worth of bills

in a money market account, so that if you lost your job, you wouldn’t

have to dip into your investments."

Mannino’s investing advice:

Start early. "The younger person always has a huge

advantage," says Mannino. "The earlier you start, the less

you have to put in, and you don’t have to contribute for as long."

If you put a $100 a month into an IRA at age 30, says Mannino, at

12 percent interest that would $649,000 at retirement. If you start

at 25, the returns jump to well over $1 million. "The three

biggest

enemies to the long-term investor are inflation, taxes, and

procrastination,"

says Mannino. "Even a year costs you."

Pay yourself first. "If it’s in your pocket, you’ll

spend it," says Mannino. "If you wait until all the bills

are paid, you won’t have anything. People need to put a little money

away for the future, and the best way is systematic investing."

Choose the right investment tool. "Stocks are all

tools — solutions to problems," says Mannino. "Like risk

— there’s a risk that I could die early. The solution to that

risk is life insurance. Inflation is a risk. The only thing that

outpaces

inflation is stocks. Then there’s the short-term risk — the

furnace

blows up. The tool is the money market. That’s what the money’s there

for. There’s political risk, a downturn in one country’s economy could

affect stock prices, so people should have their money invested

internationally,

in international mutual funds. There’s a risk that we may need to

go into a nursing home: long-term care insurance. Or we may get hurt

on the job: disability insurance."

Pay attention to the price you pay. "It’s not whether

a stock is $10 or $100, it’s how much a company’s trading for in

relation

to its earnings," says Mannino. "Don’t look at the 52-week

high low and see that the stock was trading at 300 and now it’s 100.

Don’t think that that’s a good deal. It may still be too expensive.

People are paying astronomical prices for these stocks, and when they

fall, they fall very hard. In the end, it’s the quality of the

companies

in your portfolio."

Don’t make emotional decisions. "Your gut reaction

when you see the market sliding is to sell — but often times

that’s

the wrong reaction," says Mannino. "Perhaps that’s the time

you should be buying — it’s a stock sale."

Sift through the rubble. "In times of market

volatility,

like we’ve seen," says Mannino, "if you’re a long-term

investor

you can use this to sell off some of the companies that you perhaps

shouldn’t have invested in and upgrade your portfolio. The only time

companies become cheap is in the volatile times."

To those who want to get rich trading stocks, Mannino says only

this: "If you keep pulling off the side of the road, you’ll never

get to your destination."

Top Of Page
The Feminine Face of Finance: Michele Wink

Women should be professional investors — they’re

the primary caregivers, live longer than their male counterparts,

and experience more career interruptions. Sadly, they are not, says

Michele Wink, an agent with the Northwestern Mutual Financial

Network Company at 777 Alexander Road (609-951-8700).

"One recent survey showed that only 46 percent of women between

the ages of 46 and 64 had started saving for retirement before they

turned 40, compared to 67 percent of men," says Wink. "When

it comes to investing, many women are forced to do more with less.

Because of their longer life span, women have an even greater need

than men to make the most of their retirement dollars. The single

smartest thing a woman can do is to begin saving earlier and invest

more aggressively."

Wink will be a panelist at a meeting of the Central Jersey Women’s

Network on Wednesday, May 17, at 6 p.m. at the Holiday Inn, Route

1. Elaine Britt, an attorney at Fox, Rothschild, O’Brien, &

Frankel on Lenox Drive (see story below), and Julia Raven, vice

president of Merrill Lynch, will join the discussion on how women

can better prepare for their future. Cost: $30. Call 908-281-3119.

An graduate of Rider with a B.S. in management and marketing, Class

of 1995, and an active member of the Princeton YWCA, Wink became a

financial representative with Northwestern during her final year in

college. She practices in the area of insurance, wealth-accumulation,

and retirement and estate planning.

Wink adheres to the philosophy that peak performance begins with

taking

complete responsibility for your life and everything that happens

to you, and therefore hopes to see more women taking an active role

in investing and their financial future. "Women tend to live

longer

than men by about seven years on average," she says. "As

primary

caregivers, women tend to have more career interruptions. Women

average

about 11.5 years out of the workforce, versus just 1.3 years for men,

and they stay with an employer 5.8 years, compared to 7.6 years for

men. As a result, women who do qualify for pensions plan — and

nearly 12 million women work for small firms that do not offer any

kind of pension — often have less money available to them."

The earlier, the better, when it comes to investing, says Wink. For

starters, less money is needed in the long run. And, says Wink,

"young

planners can realize advantages by purchasing permanent life insurance

early because life insurance typically costs less at earlier

ages,"

she says. "The insured can sometimes borrow against a policy to

realize dreams such as paying for a child’s education or starting

a business."

To women investors or would-be investors, Wink offers this general

advice:

Establish solid goals. "Be it a dream home on a lake

or a comfortable condo in the city," says Wink, "concrete

objectives give you something tangible to strive for and make it

easier

to assign a price tag to goals."

Assess your financial position. "Consider asking an

objective outside advisor for help in calculating your financial

stability,"

says Wink, "including investments owned."

Seek good financial advice. Look for information wherever

available and always ask questions.

Create a solid portfolio. Start as soon as possible.

"Even

seemingly small amounts of saving can build future stability and

eventual

wealth," says Wink.

Team up with an advisor you can trust.

"A good advisor will welcome your questions," she says,

"and work to get your answers."

Top Of Page
Women and Money — The Legal Terrain: Elaine Britt

Financial planning comes down to this simple principle,

says attorney Elaine Britt: "The choice is between the

government

getting the share of the assets or the family getting more," she

says.

Britt, who will be speaking at the Central Jersey Women’s Network

"Women’s Financial Planning Options," on Wednesday, May 17,

at 6 p.m. at the Princeton Holiday Inn (see story above), says don’t

wait too long to tie up loose ends, whether it’s drafting a will or

settling your estate. "In past generations, women didn’t always

know what the family assets were, and didn’t participate in financial

planning, and that’s a lot less true than now," she says.

"The war stories are about people who wait until it’s too late.

They have lots of assets and not enough time to do the kind of

planning

to avoid substantial taxes."

There’s no formula to financial planning, says Britt, who has a BS

in political science from Mount Holyoke College, Class of 1967, and

earned her law degree at Rutgers in Newark. "This is not

cookie-cutter,"

she says. "When you do estate planning for people you should

really

listen to what the family situation is, what their biases are, and

what they want to do. Some people can tell you right away that they’d

be more comfortable with aggressive planning, but you don’t want to

do something that would subject people to audit or questioning if

they’re not prepared to do more risky planning. There are some steps

that are likely to be questioned by the IRS and you have to be

prepared

to answer those questions."

Britt advises everyone to start early, but also wants to dispel the

following myths.

Jointly-held assets aren’t always the best thing. "A

lot of people have a lot of assets jointly held, and probably more

than they should," she says. "The thing they should ask

themselves

is do I want it to pass it to someone else if something happens to

me. Sometimes the answer is no." In a situation where an older

parent and child share an account, one child would then automatically

end up with a disproportionate amount of the assets when that might

not otherwise have been intended.

Probate is not a bad word in New Jersey. "There’s

a lot of publicity and promotion of trusts to avoid probate,"

says Britt. "In other states it’s very expensive and that’s where

probate gets its bad name. There might be other reasons to avoid

trusts,

but probate is not one of them. Probate is a simple and inexpensive

process in New Jersey."

Procrastination can be a person’s worse enemy in financial

matters,

but the other mistake people often make, says Britt, is not telling

the attorney the full story. "When you don’t give a full picture

of the assets, then things can backfire," she says.

— Melinda Sherwood

Top Of Page
Deciphering Financial Statements: John A. Tracy

Financial reports are, let’s face it, never going to

be easy to understand. Just as journalists spend their lives trying

to make things simple, accountants spend their time trying to make

things complicated. Nevertheless, several elegantly simple guides

can separate the wheat from the chaff of all those confusing numbers.

One good resource is Stuart Bochner’s posting to ABC’s website,

"Secrets of the Annual Report" at www.abcnews.com. Look for

overused cliches in the CEO’s statement, says Bochner. "If the

CEO says vaguely, `We had a challenging year,’ chances are you’ll

find a decline in sales and profits. Similarly, `management has met

the challenge’ can easily translate into: Sales rose and so did

management

salaries."

Sales, inventories, and receivables are the important "hidden

three" of the balance sheet, Bochner says. "If inventories

are increasing at a faster rate than sales, the company is producing

more than it can sell. Not a good sign. If receivables are rising

faster than sales, the company is not collecting its bills. It may

be a sign of deeper problems." He shows how to calculate stock

turnover versus debt turnover.

But the most well-known book for explicating the complicated is John

A. Tracy’s "How to Read a Financial Report: For managers,

entrepreneurs,

lenders, lawyers, and investors," and the subtitle is

"Wringing

vital signs out of the numbers." Tracy’s tome, published by John

Wiley & Sons, is in its fifth edition, selling for $16.95 in

paperback.

An alumnus of the University of Wisconsin, Wiley is a CPA who has

worked at Ernst & Young and is an accounting professor at the

University

of Colorado at Boulder.

With 192 pages and 25 chapters this is not one-night fireside reading.

You need to take it chapter by chapter, page by page, and let it sink

in. But Tracy is very down to earth. Almost at the end of the book

he talks about debt paying ability, called a "solvency ratio,"

a set of numbers important for every merchant.

Current ratio. "One classic and widely used ratio

to test the short-term debt-paying ability of a company is its

current

ratio , which is the company’s total current assets divided by total

current liabilities.

"The general rule of thumb is that the current ratio should be

2 to 1 or higher. In other words, short-term creditors generally limit

the credit extended a business to 1/2 or less of the company’s

short-term

assets. Given this credit limit, a company’s current assets will be

twice or more its current liabilities.

"Why do short-term creditors put such a limit on a business? One

reason is to provide a safety cushion. Each dollar of short-term debt

is `backed up’ with two dollars of present cash or future near-term

cash inflow. The `extra’ dollar of current assets provides a nice

margin of safety.

"However the 2 to 1 ratio is only a rule of thumb; there are

exceptions.

Some companies such as car dealers can borrow almost 100 percent on

their inventories, so their current liabilities are more than 1/2

their current assets. Dun & Bradstreet publishes the current ratio

for a large number of industries.

Acid Test or Quick Ratio. "Inventory is many weeks

away from conversion into cash. Products are held two, three, or four

months before sale. If the sale is made on credit, which is normal,

there’s another waiting period before the receivables are collected.

In short, inventory is not nearly as liquid as Accounts Receivable.

"The acid test ratio excludes Inventory and Prepaid Expenses.

Add the Cash to the Accounts Receivable and divide by Total Current

Liabilities to equal the Acid Test Ratio.

"It is also called the quick ratio because only cash and assets

quickly convertible into cash are included.

"The rule of thumb is that the acid test ratio should be 1 to

1 or higher, although you find many more exceptions to this rule of

thumb than the 2 to 1 current ratio.

Debt to equity ratio. "Some debt is good, but too

much debt is dangerous. The debt to equity ratio is an indicator

whether

a company is using debt to its advantage, or perhaps going too far

and is overburdened with debt.

"Divide total liabilities by total stockholders equity to get

the debt to equity ratio.

"Most businesses stay below a 1 to 1 debt to equity ratio, because

they don’t want to take on so much debt or because they can’t convince

creditors to loan them more than one-half of their assets. However,

some industries are exceptions to this rule of thumb."

Tracy casts a similar bright light on 23 other subjects in chapters

that cover everything from defining what is profit to solving the

conundrum of the true cost of goods sold. You might be able to get

this same information on the web, but there’s nothing like being able

to grab a book, this book, off the shelf.

— Barbara Fox

Top Of Page
Online Financing

For an analysis of the various financial news sites,

turn to www.usnews.com/usnews/issue/000508nycu/onlinex.htm. The sites

include CNNfn, CBSMarketWatch, TheStreet.com, Morningstar,

Quicken.com,

Silicon Investor, Motley Fool, Yahoo! Finance,

InvestmentDiscovery.com,

MSN’s MoneyCentral, Financial Engines, Virtual Stock Exchange, and

Mock Market.

Merrill Lynch has launched a website specifically geared

to women investors. Focus On Women (www.plan.ml.com/focusonwomen),

includes articles on saving for a child’s education, trading online,

investment advice, as well as tools to help women manage their

time-crunched

lives.

Top Of Page
Where Self-Help and Money Intersect

Sex, money, and power are driving forces for many of

us, and some even spend a small fortune on how-to books that promise

more of each. But Michael Lipp, a self-help guru, says those

books miss a crucial point: winning in life isn’t about what you’re

doing, it’s about who you’re being.

Thus, Lipp created "The Being Workshops," programs aimed at

helping individuals realize their full potential by first realizing

what stops them from taking effective action, the unconscious behavior

patterns that prevent growth and success. "If how-to courses and

the how-to books really worked," writes Lipp, "we would all

be thin and healthy, our houses would be neat and uncluttered, we

would all be wealthy or on our way to wealth, our retirements would

be handled, and our children would be excelling in everything they

did."

A Princeton resident, Lipp spent 40 years teaching self-growth

workshops

at Columbia Graduate School of Business, SUNY, and Landmark Education

Corporation.

"Being Wealthy," a six-hour program designed to eliminate

stress about money, will be held on Sunday, June 4, at the Holiday

Inn in Somerset. "Being in Love," a course on finding the

freedom to fall in love all over again, is presented on Sunday, May

21, at the Holiday Inn in Somerset. Both workshops cost $165. Write

the Being Workshops, 38 Sayre Drive, Princeton 08540, E-mail Lipp

at michaelipp@home.com, or visit www.thebeingworkshops.com.

Top Of Page
Rutgers Online

Rutgers Cooperative Extension is sponsoring a non-credit

self-study course entitled "Investing for Your Future," a

158-page booklet that costs $15 and that will soon be available as

an online course. The course consists of 11 units, starting with

"Investing

Basics," "Finding Money to Invest," and "Investing

with Small Dollar Amounts," as well as units on stocks,

fixed-income

securities, and mutual funds.

The program was designed by Barbara O’Neill and Patricia

Brennan, educators with the Rutgers Cooperative Extension and

creators

of the successful Money 2000 program, a program designed to help small

savers cut their costs and boost their savings. Visit

www.rce.rutgers.edu

or call 732-932-7085, extension 614.

Top Of Page
Investment Seminars

The Greedy Fox Investment Center at 3679A Nottingham

Way in Hamilton Square is offering a free investment seminar on

Thursday,

May 11, at 7 p.m. entitled "Picking Stocks II," on using the

Internet to manage your portfolio. Call 609-587-9501 or visit

www.greedyfox.com.

The Franklin Township Library will host a free, 90-minute

"Personal

Financial Management Workshop" on Tuesday, May 16, at 7 p.m. in

the library’s business room at 485 DeMott Lane, Somerset. Call

732-922-9550,

extension 3178.


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