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Choose article section...Mutual Funds: More funds charge redemption fees on short-term holdingsTaxes: Hire your spouse and deduct 100 percent of your medical insurancecostsCars: No buyer's remorse for owners of these popular modelsOn-Line Training: With everybody getting into the act, which firm shouldyou choose?Interest Rates: Rate hikes aren't necessarily bad for stocks.

Mutual Funds: More funds charge redemption fees on short-term holdings

Before you sell shares of a mutual fund that you've owned for less thana year, make sure you won't have to pay for the transaction. An increasingnumber of funds now charge fees on sales of shares held for a limited time.

Invesco, for example, recently imposed a 2 percent fee on sales of sharesin four international stock funds and one high-yield bond fund if they'resold within three months. The fee even applies to exchanges of shares fromone fund to another. In its mutual fund supermarket, Charles Schwab charges$39 or a 0.75 percent fee, whichever is greater, on shares of funds thatare purchased for no fee and held six months or less. The minimum holdingperiod had been three months. Total fees are capped at $199 if the sharesare sold via any of Schwab's automated systems, including on-line tradingand TeleBroker, and $299 if they're sold through a broker.

The number of funds that charge redemption fees jumped from 209 in December1997 to 311 in April 1999, and it's expected to grow, says Financial Research,a Boston marketing consultant for mutual funds. Most are equity funds thatinvestors purchase directly from the sponsoring company or a mutual fundsupermarket rather than through a broker. Some high-yield bond funds alsocharge these fees. Domestic equity funds, including sector and small-capfunds, top the list, followed by international and global funds. Fees rangefrom 0.5 to 2 percent and are imposed on sales of shares held for 12 monthsor less.

The fees are meant to discourage investors from buying and selling sharesfrequently; such "market-timing" strategies can hurt the performanceof a fund. In addition, the charges help compensate the fund, and its long-termshareholders, for costs associated with short-term selling.

Taxes: Hire your spouse and deduct 100 percent of your medical insurancecosts

If you're self-employed, you can deduct the entire medical insurancetab for you and your family, rather than the 60 percent normally allowed,by hiring your spouse. The Mrs. or Mr. must be a bona fide employee, however,not a no-show or a partner with a significant ownership interest in thepractice, according to a recent directive from the Internal Revenue Service.

To get the full deduction, you'll need to set up a health plan that coversyour employees. A number of accounting firms and a national tax preparerare marketing such health insurance plans for the self-employed.

Your spouse must meet the same criteria required of all employees toparticipate in the plan, such as a waiting period from date of hire. Oncehe or she is enrolled, you can be covered as a member of an employee's family,and plan costs will be fully deductible.

If you don't have a spouse working in the practice, the practice candeduct 100 percent of employees' health insurance costs, but you can deductonly 60 percent of what it costs to cover yourself and your family, on yourown return. The remaining 40 percent is deductible only if your family'sitemized medical expenses exceed 7.5 percent of adjusted gross income.

This rule is due to change, however. The writeoff jumps from 60 to 70percent on Jan. 1, 2002, and to 100 percent a year later.

Cars: No buyer's remorse for owners of these popular models

Owners of the Volkswagen Passat, Toyota Camry, and Honda Accord wouldhappily buy their vehicles again. These three topped Consumer Reports' annualconsumer satisfaction list for family cars.

The magazine asked consumers whether they'd buy the same vehicle, basedon price, performance, reliability, comfort, and enjoyment. Vehicles thatat least 76 percent of readers said they'd definitely purchase again madethis year's "high-satisfaction" list.

No pickups, coupes, large cars, or small cars made the cut, but manyluxury vehicles did. They include the Audi A4, BMW 5 Series, Cadillac Seville,Lexus LS 400 and ES 300, Mercedes-Benz E-Class, and Volvo S70/V70. Amongsport-utility vehicles, the leaders were Mercedes-Benz M-Class and SubaruForester; the Toyota Sienna was the highest-rated minivan.

The survey covered model years 1991 through 1998, but its results canbe applied to many of this year's models as well. That's because the 1999models of most of the high scorers are very similar to their 1998 predecessors.

On-Line Training: With everybody getting into the act, which firm shouldyou choose?

Like any hot young market, the on-line brokerage industry is explodingwith new entrants. Now, in addition to discount brokers like Charles Schwaband Internet-only firms like E*Trade, full-service brokerages that had spurnedInternet trading are taking the plunge.

Beginning this December, Merrill Lynch will offer an on-line financialservice that will charge $29.95 per trade. Prudential Securities has alreadycut its commissions to $24.95 for trades conducted on line or through abroker for customers enrolled in a fee-based adviser account. And beforeyear-end, PaineWebber and Salomon Smith Barney expect to offer a similarservice as part of their adviser accounts. In fee-based arrangements, investorsreceive financial advice in exchange for an annual fee, which is based ontheir total assets on deposit with the firm.

With so many firms to choose from, where should you turn when tradingon line? To help you figure that out, we looked at the Internet Broker Scoreboardcompiled by Gomez Advisors (, a Concord, MA, firm that ranks all types of on-line services, includingstock trading. Its brokerage rankings are based on how easy the site isto use; how confident customers are in the service; its resources on line,such as screening programs to choose mutual funds based on an investor'sneeds; electronic services, including account updates, alerts, and security;and costs.

E*Trade ( ) was rankedNo. 1. According to Gomez, it's easy to use and features fully interactivestock charts, detailed quotes on Nasdaq securities, and extensive editorialcontent. Its major drawback has been service interruptions-probably onereason its customer confidence score was low.

Rounding out the top five on-line traders are NDB (, the on-line service of National Discount Brokers; Charles Schwab ( ); DLJdirect ( ) from broker Donaldson,Lufkin & Jenrette; and Discover Brokerage (, the discount brokerage of Morgan Stanley Dean Witter.

Schwab placed first for the shopper who wants a complete package of financialproducts at one site, while E*Trade aced all others for the serious investorwho craves data and trades often.

Not surprisingly, the better on-line companies aren't the cheapest. Noneof the top-ranked services made Gomez Advisors' list of best firms basedon overall costs. The leading firms in that category were Brown & Co.( ), Suretrade ( ), and Firstrade( ). Their commissionsrange from $4.95 to $9.95 per trade.

Interest Rates: Rate hikes aren't necessarily bad for stocks.

Don't worry too much about higher interest rates hurting stocks. In earlyJuly, stocks rallied after the Federal Reserve raised a key short-term rate0.25 percent, to 5 percent. Indeed, since World War II, the Standard &Poor's 500 Stock Index has fallen just 0.1 percent on average in the sixmonths following a Fed rate hike. Excluding the most recent increase, therehave been 12 such periods since 1946.

The chart shows some different market sectors' overall reaction to higherinterest rates. Industries like pharmaceuticals, whose product demand isconstant regardless of the economy's strength, have tended to outperformthose that require an expanding economy to thrive. "People get sickwhether rates go up or down," says Sam Stovall, senior investment strategistat Standard & Poor's.

By Bernice Napach, Senior Associate Editor

Bernice Napach. Financial Beat.

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