Money Talk

Monday, July 17th 2000, 12:00 am
By: News On 6

Wave of new investors not bringing know-how along

We still have a long way to go when it comes to being financially literate.

In an investor literacy test sponsored by mutual fund giant Vanguard Group and Money magazine, the average score was a dismal 37 percent. That's considerably lower than the 48.5 percent and 51 percent scores achieved on similar tests in 1995 and 1997.

"This year's test results are disappointing for the industry as a whole, but somewhat understandable, given the significant influx of new fund investors in recent years," said John J. Brennan, Vanguard chairman and chief executive. "It is clear that we must step up our education initiatives and continue to leverage the Internet, in particular, to focus on the fundamentals of fund investing, including risk, reward, cost and taxes."

You can view the questions and answers at Vanguard's Web site at You can also get a printed version of the test by calling Vanguard at 1-800-523-1789 (toll-free).

Dog days should leave investors yapping with glee

One stock market analyst is betting that investors will have a good time the rest of the summer.

"Bullish things are falling into place" for investors, said Alfred E. Goldman, chief market strategist at brokerage firm A.G. Edwards & Sons.

"The stock market has already experienced a stiff correction that has done what corrections do – remove complacency, build up caution and bring down bullishness," he said in a market commentary. "The correction left us with a stock market we believe to be 10 percent undervalued."

And even though companies have pretty much completed pre-announced earnings disappointments, investors can still expect reports of strong corporate earnings this quarter, Mr. Goldman said.

"Due to the slowdown in the economy, corporate earnings will not be up as much as some had projected but will still be up some 12 percent or better for the full year," he said. "Rising corporate earnings are the main fuel for a bull market."

Technology stocks have been volatile lately, but people still need to have money in this area, Mr. Goldman said.

"The dynamic growth prospects for well-managed companies in the group have not changed," he said. "Our nation's economy is growing rapidly with improved profit margins because of technology, and we see this condition lasting for years. We strongly doubt that a company will put off investment in technology because that is the only way costs can be reduced and earnings can grow in a world where price increases are next to impossible."

Modern cars lasting longer, consumers' magazine reports

At some point in our love affair with our car, we'll have to face the tough question: Keep it or sell it?

Your car may not be the clunker you think it is. Cars manufactured in the late 1980s and 1990s are pretty dependable, according to Consumer Reports in its August issue.

Better engineering, fuel injection and corrosion-resistant body coatings make those vehicles better able to withstand wear and tear, easier to maintain and less likely to malfunction, the magazine said.

It's no wonder that the median age of cars on the road today is 8.3 years, up from 5.9 years in 1979.

Teens looking forward to tapping into the economic boom

Ask teen-agers what the American Dream is, and you'll find out it isn't just homeownership.

Twenty-five percent of teens surveyed by Junior Achievement said their idea of the American Dream is becoming a millionaire.

They view owning their own business as the ticket to getting rich, said Junior Achievement, an organization that teaches young people about business, economics and free enterprise.

"With the economy at record levels and a promising future ahead, it is also not surprising that economic and consumerist measures of success are now heavily reflected in teen-age concepts of the American Dream," Junior Achievement said. "Forty-three percent of students think their American Dream will be fulfilled if they make enough money to be able to afford the things they want."

Teens aren't entirely obsessed with money. A majority of those in the survey said the American Dream also includes having a good family life and giving your children a better life than you have.