UPDATE: Focus on finance

May 9, 2003

Mutual funds; colleges; taxes; debt

 

UPDATE

Focus on Finance

By Yvonne Chilik Wollenburg

Jump to:Choose article section...These funds might give you a clipping Online guidance in hunting down colleges How come I have to pay taxes, Mom? Check out the top-rated funds You may regret investing in these "safe" funds

These funds might give you a clipping

As hedge funds become more available, some investors are likely to get bilked, says the federal government. To show how risky these funds can be, the SEC has set up a fictitious Web site that appears to entice investors into putting their money in a "Guaranteed Returns Diversified" hedge fund, "the world's leading operator of hedge funds, based in the Wylshock Islands in the Indian Ocean, with 68 offices worldwide." Clicking through the site at www.growthventure.com/grdi brings readers to a warning that investors should always check out the people behind financial offers, be wary of offshore investments, and ignore claims that sound too good to be true.

Before investing in any kind of hedge fund, read the prospectus to make sure the level of risk involved in the fund's investment strategies meets your financial goals and needs, says the SEC. Ask about fees, which are typically high, and understand that your right to redeem your shares may be limited. If you believe you have been a victim of hedge fund fraud, contact the SEC online at www.sec.gov/complaint.shtml .

Online guidance in hunting down colleges

To help find the right college to suit your high schooler and your wallet, go to College Opportunities On-Line at www.nces.ed.gov/ipeds/cool . This online directory of nearly 7,000 colleges and universities is put together by the National Center for Education Statistics in the US Department of Education. You can search for colleges by location, degree offerings, or programs.

How come I have to pay taxes, Mom?

The federal government is offering to give your kids a financial education. The IRS has a new tutorial on the basics of tax preparation, the history of taxation, and how taxes affect our daily lives. The program is designed for high school students, and includes lessons, word puzzles, and tax trivia questions. Go to www.irs.gov, click on "Individuals," then "Students," and then "Understanding Taxes."

Check out the top-rated funds

Lipper, the financial research company, handed out awards to four fund companies and 22 individual funds for top performance during the three years that ended Dec. 31, 2002. The bond funds that won awards: American Century Target Maturities Trust 2020, Fidelity Real Estate High Income Fund, Comstock Strategy Fund, PIMCO Emerging Markets Bond Fund, SAFECO California Tax-Free Income Fund, and TCW Galileo Total Return Bond Fund. The table shows the winners among different classes of equity funds.

CategoryWinning fund3-year
Large-cap value fundsAmerican Century Large Company Value Fund0.66%
Large-cap core fundsLegg Mason Focus Trust–13.02
Large-cap growth fundsSequoia Fund8.91
Multicap value fundsPBHG Clipper Focus Portfolio13.08
Multicap core fundsAmSouth Select Equity Fund3.42
Multicap growth fundsBear Stearns Alpha Growth Portfolio–7.31
Mid-cap value fundsJPMorgan MidCap Value Fund15.35
Mid-cap core fundsFAM Value Fund9.22
Mid-Cap growth fundsLiberty Acorn Twenty Fund3.60
Small-cap value fundsFranklin MicroCap Value Fund18.09
Small-cap core fundsSchroder Ultra Fund68.62
Small-cap growth fundsCentury Small Cap Select Fund18.21
Mixed equity fundsFPA Crescent Portfolio13.51
Misc. US diversified equity fundsComstock Capital Value Fund21.64
Sector fundsBurnham Financial Services Fund32.42
World equity fundsMonterey OCM Gold Fund25.95

 

You may regret investing in these "safe" funds

A new breed of funds can keep you from losing your shirt, but you'll pay a lot for the protection, says Morningstar, an investment research firm. Principal protection funds are wrapped in insurance to give you a guaranteed rate of return—if you follow the rules. You have to leave your money in the fund up to seven years and reinvest all the money earned to get full protection. In addition, offering periods generally run only three months.

Don't let a forgiven debt come back to haunt you

Settling a debt for less than you owed sounds like a great financial move. Just make sure you report the amount that was forgiven to the IRS as income, says Myvesta, a nonprofit financial management organization. After settling a debt, the creditor should send you a Form 1099-C or 1099-A for reporting miscellaneous income. If the lender doesn't send you the form, get one from the IRS and file it yourself. If you don't report the forgiven amount and the IRS finds out, you could face a late penalty, or even an audit notice.

 

Yvonne Wollenberg. UPDATE: Focus on finance. Medical Economics May 9, 2003;80:18.