CDs help you root for the home team More and more banks, those one-time bastions of conservatism, are using gimmicks to compete with brokerages, mutual funds, insurance companies, and others for your financial business.
Some examples found by the Jorgensen Report, a newsletter:
Skokie Federal Savings in Chicago gave depositors an extra quarter-point interest on their savings accounts if they picked the winner in last year's governor's race. The bank made the same offer when the Chicago Bears were in last year's Super Bowl.
People 60 or older were offered a half percentage point more on one- to two-year certificates of deposit at Bell Savings in San Francisco.
Air travelers got a lift from Marine Midland Bank in New York. The bank let Visa and MasterCard holders earn one mile in the frequent-flier programs of Continental, New York Air, or Eastern Airlines for every $1 charged on the cards.
You'll probably see more gimmicks this year. But consumers should try to look beyond bells and whistles to the long-term costs. Find out how often interest is compounded; more-frequent compounding means more money for you. Also, check other banks: You may be able to get a better rate without having to pick Super Bowl champions. Finding someone to make your money grow ...
What are investment managers and why do people hire them? They're specialists who manage your portfolio for a fee. They usually buy and sell securities without consulting their clients, although they follow general guidelines. Michael Stolper, who finds and evaluates investment managers for investors, gives these reasons for using a specialist:
1.It's easier to evaluate money managers than each prospective investment.
2.They usually have a high level of education, training, and experience.
3.They have access to numerous research sources, the most influential of which are available only to institutional accounts.
4.The domination of the markets by specialized investors has made it useful to ``institutionalize'' portfolios. Of course, not all of these statements are true about all investment managers. But if you get a good one - and can pay the fees - the rewards of the search can be great. ... and yardsticks to measure their money trees
Comparing investment managers is ``deceptively simple,'' Mr. Stolper says. There are just three things to check:
The credibility and excellence of the firm's record.
The length of the record.
The continuity of the people who created this record.
Stolper has more ideas on finding and evaluating investment managers. For a copy of ``How to Select an Investment Manager,'' write to Stolper & Co., 525 B St., Suite 630, San Diego, CA 92101. Mutual funds bust sales records ...
Mutual funds just had their best year ever - again. After a record year in 1985, stock, bond, and income mutual funds had sales of $211 billion last year, nearly double the previous record of $114 bilion set in 1985, the Investment Company Institute reports.
By the end of the year, the institute expects assets in all funds, including money market and short-term funds, to reach $730 billion, compared with $495 billion at the beginning of 1986 and just $95 billion at the beginning of the decade. ... but turn in ho-hum returns
Hot mutual fund sales only meant warm returns for many funds. According to Lipper Analytical Services, the average equity fund gained about 13 percent last year, compared to 19 percent for the Standard & Poor's 500. A dog of a fund?
Mutual Fund Forecaster, which provides the data for the chart below, also tracks the worst-performing funds. The worst performer for the last year? Bowser Growth, down 23 percent. Tax reform windfall or hot potato for the states?
Unless 33 states change their income-tax laws, residents of a many regions of the country are going to see higher state taxes.
As most state income tax codes couple their taxes to the federal tax law and since the new federal law eliminates many deductions, applying current state tax rates to the broadened tax bases would automatically result in higher state income taxes, says the Advisory Commission on Intergovernmental Relations.
States that would experience large decreases apply their taxes as a percent of federal income tax liability. States with only small losses tie their taxes to federal law in only small ways or not at all. The commission recently drew up this list of estimated state income tax increase or decrease due to conformity to federal tax law: Increases Louisiana 28% Colorado 22% Montana, Oregon, Utah 19% Iowa, Kansas, Missouri, Oklahoma . 18% Hawaii, Minnesota 15% Kentucky 14% Maine 12% Connecticut, West Virginia 11% Delaware, District of Columbia, Georgia 10% California, New York, Virginia 9% Maryland 8% Ohio, Illinois 7% Michigan 6% Indiana, Wisconsin, Mississippi 4% Alabama, Massachusetts 1% Arizona, Idaho, New Mexico, and South Carolina were estimated to have increases but data were not yet available for an estimate. Decreases Rhode Island, Vermont 11% North Dakota 10% Nebraska 9% New Jersey, New Hampshire, North Carolina, Pennsylvania, Tennessee 1% Arkansas under 1% No effect Alaska, Florida, Nevada South Dakota, Texas,Washington, Wyoming. Give your kids a piece of a highway ... or a sewer.
Municipal bonds are looking more attractive to many parents, since tax reform has changed the rules for the income of a minor. Now, income from all gifts, including gifts from parents, grandparents, aunts, and uncles, will be taxed at the parents' tax rate, until the child is 14 years old. One way around this might be to give municipal bonds or shares in a muni bonds fund. But first compare the after-tax returns of these tax-free investments with any taxable investments you might be considering. With a top tax bracket of 28 percent next year, a high-yielding taxable investment may still beat a muni. Tax reform giveth, FICA taketh away
Tax reform may have cut your tax bite, but social security - once again - is putting some of the bite back. A long history of increasing both the tax and the wage base on social security continues this year. The base, which is the amount of income covered by the Federal Insurance Contributions Act (FICA), rises from $42,000 to $43,800.
The tax rate this year will stay the same as in '86 - 7.15 percent for employees and 12.3 percent for the self-employed. But it will go up to 7.51 percent and 13.02 percent in '88. By 1990, the wage base, the maximum salary from which social security tax is taken, will have risen to $50,100. The tax for employees will be up to 7.65 percent, and the self-employed will pay 15.3 percent of their income for the FICA tax.
If you're retired and between the ages of 65 and 69, you can earn up to $8,160 a year without losing social security benefits. If you're retired and 65, the limit is $6,000 a year. If you're 70 or over, there's no limit on earnings.