Wise Investing

How much risk should you take with your savings? A general rule of thumb is to subtract your age from 100. If you are 60, then 40 percent should be in stocks; if you are 40, then 60 percent should be in stocks.

The money not going into stocks should be invested in the more-conservative U.S. Treasury bills, bonds, or notes.

But safety does not equal profitability, say the experts who urge broader exposure to the stock market. While the return of principal and interest is guaranteed by buying government obligations or certificates of deposit, most investors forget to allow for the impact of inflation or taxes on the interest earned, they say.

Develop a winning plan

The decline of high-flying technology and dot-com stocks has been well-documented.

But there is still life in the market, say veteran mutual-fund managers. People need to eat, drive cars, wear clothes, and take vacations, so look for the stocks of companies that dominate their markets, have broad, viable economic “themes,” and have strong brand names, they say.

Some other suggestions to develop a winning investment plan:

• Buy what you know, companies with products or services you use.
• Make sure both the company and its industry are growing, and go with the industry leader.
• Look for repeat profitability, with gross profit margins of at least 50 percent and net margins of at least 8 percent.
• Make certain the company has more cash on its books than long-term debt.

There are good and bad sources of financial advice, including the ultra-conservative Warren Buffett and the miserly Scrooge McDuck, Donald Duck’s uncle.

“Thrift is the secret of my success” in amassing enough money to fill a three-acre money bin to a depth of 79 feet, McDuck reveals in panel after panel of the comic strip. He spurns the newsboy because he can find a paper for free in the park, and counsels Donald to “never put your stomach ahead of your purse.”

Buffett, the second-wealthiest person in the United States (behind Microsoft’s Bill Gates), espouses patience, noting that if you cannot be in the stock market for 10 years, you should not be in it for 10 minutes.

Financial Web Sites

• www.napfa.org: The site for the National Association of Personal Financial Advisors.
• www.financialengines.com: Plug in your portfolio and find out what the odds are you will meet your goals.
• www.bestcalls.com: This free site will notify you when specific companies are meeting with analysts.
• www.riskgrades.com: This free site compares the risk of your portfolio with the overall market.