Margin buying; cell phone numbers
More investors are using borrowed money to buy stocks these days, and regulators are worried that they don't understand the heavy financial risks involved. The amount of debt used to buy stocks went up by 25 percent from January through July, says NASD, which regulates brokerage firms.
Buying on margin means borrowing money from a broker to buy stock. But the money must be paid back, plus interest, whether the stock rises or falls, so you could lose even more than you invested. What's more, if the value of your account falls below a set minimum, your broker can sell your shares without letting you choose which stocks to sell or even notifying you beforehand. Some brokers automatically open margin accounts for investors, so be sure to specify a cash account if you don't plan to trade on margin.
If you want help deciding what to do with your money in light of scandals hitting corporate boards, the stock exchange, and mutual fund companies, check out a collection of articles gathered by the Alliance for Investor Education, a group of trade and governmental organizations. Member organizations have contributed articles designed to help readers become more successful investors. Go to the group's Web site at www.investoreducation.org to read articles from the SEC, NASD, The Bond Market Association, and others.
Whether a mutual fund is big or small doesn't affect how much money it will earn for shareholders, says a study by Lipper, a financial research firm. The study of core, growth, and value funds from 1991 through 2001 found no consistent impact of fund size on performance. Sometimes small funds beat out large funds, and sometimes the reverse. But the advantages never lasted from year to year.
You'll be able to keep your cell phone number even if you switch wireless carriers, beginning on Nov. 24, thanks to a ruling by the FCC. Some carriers will even allow you to discontinue your old-fashioned wireline phone service (the one that's hooked up to the wall at home or the office) and move that phone number to a wireless carrier.
Auto insurance rates are expected to increase by 6 percent next year, due to the rising costs of vehicle repair and medical care, says the Insurance Information Institute. The average cost of car insurance nationwide is projected at $898 for 2004, an increase of $51 per vehicle over 2003.
Yvonne Wollenberg. UPDATE: Focus on finance. Medical Economics Nov. 7, 2003;80:12.