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Examining allocation of a six-digit portfolio

Q: My husband and I are over 65. We inherited stock which, added to what we already have, amounts to $345,000. Much of it is in growth companies. We have about $100,000 in money-market funds and some $80,000 in bank CDs. We own our home outright, and have debt of about $12,000 that we are paying off with our earnings. A family member thinks we have too much money in the money-market account. We plan to invest some of the money funds in a Roth IRA. Any advice? And are discount brokerages reliable?
E.K., from N.C.

A: "There is nothing wrong with having ample reserves in money-market funds. That can be very prudent," says Paula Hogan, of Hogan Financial Management in Milwaukee. "Many smart people keep a large cash reserve," especially in an uncertain economy, or as they get older and might suddenly need cash, she says.

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Ms. Hogan favors keeping three to six months cash on hand - perhaps even up to 12 months for more risk-averse persons. The cash, she says, should be "outside your investment portfolio," so you can tap into it in an emergency.

She recommends having no more than two-thirds of your portfolio in stocks - about what you have now. A Roth IRA to shelter assets can be beneficial, says Hogan.

Finally, if you use a discount brokerage, "look for an established firm, like Waterhouse Securities, or Charles Schwab."

Q: We often read about the need for a person to check their credit reports. But is this necessary for a person who has paid off their mortgage, has no debt, and pays off all credit cards each month?
H.A., Tyler, Texas

A: "It is wise to check credit reports annually to see if there is any unusual activity," says Ms. Hogan.

Q: Last week, a story mentioned that some $2 trillion was invested in socially screened portfolios, such as pension funds, but only a small fraction of that, $153 billion, was invested in socially screened mutual funds. Why is there so little interest in mutual funds?
A.B., Boston

A: "Actually, there is growing interest in socially screened mutual funds," says Todd Larsen, a spokesman for the Social Investment Forum in Washington.

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In 1995, $12 billion was invested in socially responsible mutual funds. By 2001 that had hit $153 billion, an increase of more than 1,000 percent, Mr. Larsen says.

Questions about finances? Write: Guy Halverson, The Christian Science Monitor, 500 Fifth Ave., Suite 1845, New York, NY 10110, E-mail: halversong@csps.com


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