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On money

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times, published January 13, 2002

Expectant mom wants family to invest for baby's future

Expectant mom wants family to invest for baby's future

Q. I am expecting a baby and would like to set up a way people could contribute to an investment for the baby's future as an alternative to buying a gift. I would like to do something that will provide more growth than I could get with interest on a savings account. I think many of my relatives would like to contribute, but some of them would only be able to make very small gifts. Can you make any suggestions?

A. You have a great idea. A newborn baby is the ideal investor for a stock mutual fund. Presumably your little one will not need to spend the money until freshman year in college, 18 years or so from now. That means your baby can afford to take some investment risks with the hope of achieving good returns over the long run.

You face a couple of logistical problems. One is that financial institutions typically do not permit people to open accounts in the names of babies not yet born. Instead, you will need to open an account in your name or your spouse's that you can use to hold the money temporarily. You will owe income tax on any interest or capital gains you might earn during the interim.

The second issue is minimum investments. Most fund companies will not accept that $10 check your Aunt Emma would like to mail in for your baby's future. One way around that would be to open a bank or credit union account to receive contributions, which then could be consolidated and invested in a mutual fund of your choice.

Another option would be to deal with a mutual fund company that will take $10 checks. One that fits that description is the Monetta Funds. You can open an account with $250, then you and your friends and relatives can send in subsequent investments of any size. Later on, your little one might even enjoy the fund company's children's program, aimed at making investing educational and fun. More information is available on the Internet (www.monetta.com) or by calling (800) 666-3882.

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Q. Do global/international mutual funds typically rebound much slower in a down economy?

A. What we often see is the stock market rebounding in anticipation of an economic rebound. I passed your question along to Gerald Perritt, a Largo money manager who writes a newsletter on mutual funds, to get his perspective.

"I don't think there's any hard and fast rule," he said. "It just so happens that at least this time around the rest of the world seems to be behind us. The anticipation is that we'll come out of our economic slump before Europe and before Japan. The dollar also has been the strongest currency in the world and about everything bad that could happen in international investments has. Even the World Trade Center disaster hurt foreign markets a little bit more than it hurt the United States. The thinking is that if it happens here, the likelihood is greater that it will happen there."

The good news is that he's looking for a "positive surprise" in the international markets this year.

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Q. I have a zero coupon bond worth $100,000 coming due soon. I earned 8 percent a year over the past 12 years. Because I am in my early 60s, I do not want to invest in anything speculative or with a longer term than five years. Should I consider CDs, Treasuries, mutual funds, the stock market? I do not want to jeopardize principal.

A. If you don't want to jeopardize principal, you should stick with CDs, savings bonds or government bonds that you can hold to maturity.

Investing in the stock market or in stock or bond mutual funds requires taking risk in the hope of achieving higher returns. Don't even consider these investments unless you are willing to learn about them first and get comfortable with the risk you would be taking.

Online money map

The American Institute of Certified Public Accountants and Money for Women magazine are promoting Women's Financial Health Week this week. Visit the Web site www.womensfinancialhealthweek.com to check out the financial information and advice they're offering.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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