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• What's your time horizon? Are
you.investing for three, 10, 15 or 20
years? Even if you are 50, you could
easily be looking at a 30- or even 40-
year investment horizon. People are
living longer and retiring earlier.
• Do you need any excessive liquidi-
ty and for what reasons? If you are
buying a new house in six to 12
months, you may want to make your
down payment in cash. Or maybe you
want to purchase a new boat next year?
• What is your tax situation? Are
you in a tax bracket sufficient for tax-
free investments? Or is it all taxable?
Should you be managing capital gains
with stocks?
• What legal requirements are
involved? If it is charitable trusts and
funding, you may even want to
restart and invest.
• What other unique needs and
considerations do you have? If you
own a gas station, are all your assets
tied to that business? Do you really
want to own securities (—I related to
energy and oil service? . nversely, if
you are a General Motors executive,
do you want to buy more GM stock?
And what's your stand on smoking?
Do you want to avoid tobacco
stocks, or invest only in a mutual
fund that doesn't buy Philip Morris?
If you still need to be convinced of
the importance of asset allocation, con-
sider the results of a 1991 study that
determined which attributes influenced
investment portfolios. No. 1 was asset
allocation, how much you put in the
pot. Surprisingly, the actual selection of
securities was not that important.
Strategic or tactical asset allocation
means you are involved with long-term
investment trends over three to five

years. That way, you should not react
to a sudden drop in the market as hap-
pened this past August and September.
Bernstein is an advocate of long-term
holdings, and said, "In the end resui-
Nme were right. Don't worry about
short-term. It's irrelevant. Do not pan',
when you see the marker drop."
If you look at the studies of invert-
merit trends over the last 70 years,
stocks outperformed bonds by approx-
imately five percent. Bonds outper-
formed the money market and CDs
by 1.5 percent. And the money market
is one percent greater than inflation. (=
Thus, a typical asset allocation
would be 60 percent in stocks, 35
percent in bonds, and five percent in
the money market and cash.
"Don't buy crap stocks," cautions
Bernstein. "Forget the hot tip of the
day and concentrate upon Coca-Cola,
GE, Merck, Pfizer or Microsoft."
Once your asset allocation is com-
pleted, you should rebalance it regu-
larly,. "There's no problem selling
losers. Everyone makes mistakes "
said Bernstein.
Here are some other good piec-
advice:
• Gains are good. Take them.
• If you do not want capital gains,
that should be the predominant rea-
son why you do not sell.
• If you invest, your reason to sell
should be to buy something else.
• If you don't need income, dont
buy income stocks.
"The portfolios of many elderly
and retired people are dominated by
utility stocks. That's the wrong thing
to do. They would be better off in the
bond market or money market," said
Bernstein.

(

Marty
Bernstein
has sauna'
financial
advice for
seniors.