Financial Beat

By Yvonne Chilik Wollenberg

Mutual Funds: New tax breaks could be in the pipeline

A bill now before Congress would let you cut your taxes by sheltering some gains on mutual funds. Under current law, you have to pay tax on a fund's capital gains, even when you don't sell shares, and even if the fund's overall value drops. (See Financial Beat, April 23, 2001.) Taxes eat up more than 2.5 percentage points of the average stock fund's total return each year, according to the US Securities and Exchange Commission.

The proposed law would let you defer tax on up to $3,000 ($6,000 for couples) of the capital gains you earn when mutual funds sell stocks and reinvest the gains. You'd owe tax only when you sell fund shares.

Stocks: New investor tool rates best buys

If you're looking for guidance on finding undervalued companies to invest in, check out Morningstar's new stock ratings. The investment research firm, which is known for rating mutual funds, now awards up to five stars for individual stocks whose prices are cheap compared with their cash flow and earnings prospects. A stock whose estimated fair value is at least 30 percent above its current market price earns the highest rating, five stars. A stock whose value equals the current market price, give or take 10 percent, merits three stars, while a stock valued at least 30 percent below current market price gets one star. The rating system is available with a premium membership in Morningstar.com at $99 a year.

Auto Safety: It's the chatting, not the dialing

Talking on a hands-free phone while you drive is just as distracting and therefore dangerous as dialing or holding a phone, according to a new study.

Researchers at the University of Utah studied the reaction times of people performing various activities while using a driving simulator. The researchers measured responsiveness to signals such as a red light while doing other things—talking on a handheld or hands-free cell phone, listening to audio books, or listening to and changing radio stations. Those who were talking on the phone were twice as likely as other participants to miss a red light and took longer to react to signals they did catch. There was no difference between those using a handheld phone and those using a hands-free model.

Nearly 75 percent of drivers who usually have a cell phone in the car say they use it while driving, according to the National Highway Traffic Safety Administration.

How to help relief efforts

Charitable organizations nationwide are collecting funds to support relief efforts in the wake of the terrible events of Sept. 11. To help, contact any of the following:

AmeriCares
161 Cherry St.
New Canaan, CT 06840
800-486-4357
www.americares.org

Catholic Charities USA
PO Box 25168
Alexandria, VA 22313
800-919-9338

Daily News Charities Inc.
PO Box 3307
New York, NY 10001
212-210-2244

International Association of Fire Fighters AFF General Secretary- Treasurer's Office
Attn: New York Firefighters
9-11 Disaster Relief Fund
1750 New York Ave. NW
Washington, DC 20006
daily.iaff.org/fund.htm

National Organization for Victim Assistance
1730 Park Road NW
Washington, DC 20010
202-232-6682

New York State Fraternal Order of Police WTC Police Disaster Relief Fund
911 Police Plaza
Hicksville, NY 11801

Patrolmen's Benevolent Association of the City of New York
40 Fulton St.
17th Floor
New York, NY 10038
212-233-5531
www.nycpba.org

Salvation Army
800-725-2769
store.yahoo.com/salvationarmy

United Way Sept. 11th Fund The United Way of New York City
2 Park Ave.
New York, NY 10016
800-710-8002
uwnyc.org

The author is a freelance writer in Teaneck, NJ.

Yvonne Wollenberg. Financial Beat.

Medical Economics

2001;19:14.