Taking Stock- Seniors and Stocks

  Dear Mr. Berko: I'm 76 and have decent stocks worth $407,000 that pay about 4 percent and $118,000 in a money market paying about 0.5 percent. I've got good income stocks with medium growth potential but no bonds. Our stockbroker insists that the market will go over l4,000 this year and wants me to put $25,000 in a bond fund that pays 5.2 percent and buy $65,000 in stocks to increase my income plus stock market growth. My wife and I have pensions, Social Security and a 5.5 percent, $91,000 mortgage on our son's home.  We don't owe any debts, need more income or need to increase my stock value but my wife thinks it would be nice. I think we should sit tight. I don't want to worry about the market going down again. But our stockbroker is so extra sure it will go up. He makes it look so simple because the stock market is so strong and he says we may miss a very easy chance. Is he right? What do you think?
  - E.F., Fort Walton Beach, Fla.

  Dear E.F.: Be mindful that your broker is a salesman. He sells you things to make a living, and if he doesn't sell you things, he's in big trouble -- with the firm that employs him and the banks that loaned him money for a home and a car. And if he doesn't sell you things, his boss will hire someone who will, and then your broker will default on his mortgage and his car loan. So the best way to get you to invest is to convince you that stock prices are headed higher. 
  If you don't need more income and are comfortable with your investments, then you should be risk averse and stay your present course. While the market may continue higher, that $118,000 cash balance makes good sense for folks at your age and stage.
  The Dow Jones is no longer a market for investors; rather, it's become a market for traders. Buying high-quality issues with good long-term revenue, earnings and dividend potential to hold for five or so years is no longer acceptable in the industry. Your broker can't make a living if you buy 300 shares of ABC for $10,000 and hold them for five years. But he can make a living if you buy 300 ABC, then sell them in six months to buy 400 shares of XYZ, then sell them in seven months to buy 300 XXX, then sell them in eight months to buy 500 shares of YYY -- multiple commissions in 21 months versus one niggardly commission in five years.
  Brokers and their firms need constant turnover to afford fancy offices, BMWs, costly analysts, huge executive salaries and bonuses of $l44 billion last year. Long term on Wall Street (where the Dow can range over 500 points a day, several times a month) is either seven days or one week, whichever comes first.
  And you risk going from worse to "worserer." Today, you must compete with hedge funds, crooked bond traders, fronting, fraud, insider trading, derivatives, computerized trading, day traders, enormous block trades, mini flash-crashes, after-market transactions, ad nauseum. It's Sodom and Gomorrah out there. The market is a cesspool for greed, corruption and wild excesses aided and abetted by Merrill Lynch, Goldman Sachs, JPMorgan, Bank of America, Wells Fargo, your friendly neighborhood brokesters and banksters.
  It's unwise to reach for more than you need. So remember that losing an opportunity is a much less regrettable alternative than losing money.

  Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2008 CREATORS SYNDICATE, INC.