UPDATE: Focus on finance

May 23, 2003

Home prices; best stocks; safe vacations

 

UPDATE

Focus on Finance

By Yvonne Chilik Wollenburg

Jump to:Choose article section...Will real estate run out of steam? Bear market still gnawing at most stocks You might get more protection for your savings Duct tape won't be enough Looking for a safe haven? Are high-yield bond funds worth buying?

Will real estate run out of steam?

Housing booms are followed by a bust about 40 percent of the time, says an International Monetary Fund study of real estate prices in 14 industrialized countries. Housing price busts, when prices drop an average of 30 percent, occur about every 20 years and usually last about four years. The last bear market in US real estate was in the 1980s, when prices fell 28.5 percent.

Home prices are still going up, but at a steadily declining rate. Appreciation peaked at 8.4 percent in 2000, and was 3.9 percent in the final quarter of 2002, the latest figures available, says Freddie Mac, which packages and sells mortgage-backed securities.

Bear market still gnawing at most stocks

The only categories of mutual funds that made money in the first quarter of the year were those specializing in real estate and health company stocks, according to Morningstar data. Real estate funds returned 1.2 percent and health care funds 1.1 percent, compared to an average decline of 2.8 percent for all domestic stock funds. Technology funds, which had staggering losses during the three-year bear market, did relatively well by losing only 0.50 percent—which put them among the best performers.

 

 Category1st quarter return1-year return
Amerindo Technology fund—Class D (ATCHX)Specialty technology24.4%8.2%
Polynous Growth Fund—Class A (PAGFX)Small growth21.3–25.9
Internet UltraSector ProFund—Investor Class (INPIX)Specialty technology14.2–38.3
Apex Mid Cap Growth Fund (BMCGX)Small growth13.9–33.3
Jundt US Emerging Growth Fund— Class A (JEGHX)Small growth13.6–15.8
Perkins Opportunity Fund (POFDX)Small growth–29.9%–39.4%
Telecommunications UltraSector ProFund—Investor Class (TCPIX)Specialty communications–23.5–54.5
Frontier Equity Fund (FEFPX)Small blend–19.2–74.0
Ameristock Focused Value Fund (AMFVX)Small value–18.0–41.6
ICM/Isabelle Small Cap Value Fund (IZZYX)Small–15.7–38.5

You might get more protection for your savings

A bill to raise federal insurance on bank deposits to $130,000 per account, passed overwhelmingly by the House in April, is now under consideration by the US Senate. It would boost protection by the Federal Deposit Insurance Corp. from its current limit of $100,000, and index future coverage limits to the inflation rate. Congress hasn't boosted the insurance limit for 23 years.

Duct tape won't be enough

In case of an emergency such as a terrorist attack, you'll need more than bottled water, canned food, and duct tape. You should carry a major credit card with you at all times, and have on hand enough cash to cover your financial needs for several days, says Myvesta, a consumer financial education organization. Americans, on average, estimate they need to keep about $2,500 handy for emergencies.

Looking for a safe haven?

If safety is your top concern when planning your next vacation, head for Luxembourg. It's the world's safest city, says a survey by Mercer Human Resources Consulting, a business consultant. The other top cities for personal safety are Bern, Geneva, Helsinki, and Singapore. Safest cities in the US are Honolulu, Houston, and San Francisco; the least safe is Washington, DC.

The most dangerous city in the world is Bangui, in the Central African Republic. You might also want to stay away from Abidjan in the Ivory Coast, Pointe Noire and Brazzaville in Congo, and Luanda, Angola. Safety scores are based on crime levels, law enforcement capabilities, and internal stability.

Are high-yield bond funds worth buying?

The big winners in the first quarter were emerging markets bond funds, which posted a 7.99 percent return, according to Morningstar. Bond funds in general did well, with all categories turning in positive returns.

But it turns out that a bond fund's yield is a bad predictor of how much money it will produce in the future, says a Morningstar study. It examined the predictive power of yields for short-term bond and short-term government funds over the past six years and found that high yields didn't predict high profits. In fact, a high yield might well be a warning that the fund's managers are taking on risky investments.

 

Where car maintenance
costs* the most

San Francisco6.79 cents per mile
New York6.38
Long Island, NY5.62
Honolulu5.49
Chicago5.21
Bismarck, ND3.56
Casper, WY3.64
Richmond, VA3.68
Lubbock, TX3.76
Billings, MT3.80

*Cost to maintain a 2003 Ford Taurus SEL sedan.
Source: Runzheimer International

 

Yvonne Wollenberg. UPDATE: Focus on finance. Medical Economics May 23, 2003;80:13.

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