PORTFOLIO. Tips and trends that affect you and your money

Do they come in envelopes with little windows? One of the most boring gifts many of us got for Christmas when we were children was a nice, crisp greenback. It might have been a $10, $20, or $50 bill, but you couldn't play with it and there was always the feeling you were supposed to do something ``important'' with it, like save it for something. Our views changed as we got older.

That's good, because there is a much wider variety of monetary gifts people can give this Christmas.

First, there are United States Savings Bonds, which are now yielding about 8 percent interest, with federal taxes deferred and state taxes eliminated altogether.

Recently, the American Express Company introduced its Gift Cheque, which, like the Traveler's Cheque, can be redeemed almost anywhere and will be refunded if lost or stolen.

If you have something more tangible in mind, you might consider a gold coin. These hold their value over long periods, and can be bought in fractions of an ounce, which is nice for those who think the current price of about $490 for a one-ounce coin is too stiff.

If gold is too much, several countries also have silver coins and nuggets, but the price of these tends to be a bit more volatile.

More-sophisticated givers might consider government-backed zero coupon bonds as a long-term investment instrument. While these offer no current income, they do hold the promise of a substantial increase in value at maturity.

Home-equity loan ads need more facts

Advertisements for home equity loans don't disclose important information about fees, interest rates and repayment terms, a consumer group says.

Consumers Union, the nonprofit publisher of Consumer Reports, says:

80 percent of the ads it surveyed failed to include information about closing costs such as fees for title examination, appraisal, and recording. Ninety percent failed to say whether or not there was an annual maintenance or membership fee.

62 percent did not say whether the loans had an interest rate cap or what the cap was, if present. Thirty-five percent failed to disclose the formula for calculating the interest rate, and 40 percent lacked an understandable disclosure of how often the interest rate will change.

60 percent did not describe repayment terms, including whether or not a balloon repayment would be required at the end of the loan term.

One in 4 ads promoted the tax deductibility of home equity loans without explaining restrictions. Under the new tax rules, homeowners cannot deduct interest on loans greater than the original purchase price of the home, plus the value of improvements, unless the loan is for home improvements, medical expenses, or education.

The popularity of revolving equity lines, secured by a second mortgage on the borrower's home, has mushroomed since the 1986 tax law began phasing out the deductibility of other forms of consumer borrowing.

Consumers Union looked at advertisements placed by 20 financial institutions in major newspapers in four cities: New York, Washington, Los Angeles, and San Francisco.

The American Bankers Association, the chief trade group for commercial banks, has said it would support some disclosure requirements. But it says voluntary industry efforts should be given a chance to work before Congress passes any disclosure laws.

Guess whose book got highest rating

When it's not looking into home equity loans and testing washing machines or cars, Consumers Reports does some book publishing. Its latest effort is a ``Guide to Income Tax Preparation.'' The $9.95 book is about the same size as those published by firms like H&R Block, the tax preparers, and Arthur Young & Co., accountants, but there are some visible differences.

First, the forms. The 1986 Tax Reform Act was supposed to be a step toward ``tax simplification,'' but anyone who has gotten an early peek at the forms we'll have to fill out by next April 15 says the job will be far from simple. So it might be a good idea to take an early look at some of the forms and see how they could be used.

To help in this effort, Consumer Reports has put samples of all the forms on green pages, so they're easy to find among the white ones. (There's even a green sample letter of protest to the Internal Revenue Service.) Each sample follows a thorough discussion of the section of the tax law that is needed to fill out the form.

Green must have been a favorite color, because it is also used for headings, specific explanations of the tax code, and for special notes, cautions, and tips in the margins. This does help them stand out.

Throughout, the book compares points of the old tax law with the new, which is helpful in making a mental transition to the new rules.

Money market funds to the rescue?

The Oct. 19 stock market plunge helped remind many investors of a haven for their money they may have forgotten: money market mutual funds. Since that debacle, millions of dollars have poured into money funds, and investors and savers have started looking for the best yields with the least amount of risk. By late October their assets had hit a record high of $241 billion.

Back in the early 1980s, when money funds were paying yields as high as 17 percent, that was the best reason to use these funds, but as yields began to drop, many investors left them for the more attractive yields of stocks and bonds.

Now, the money funds are reminding us of their most important attribute: safety. At 6 to 7 percent, their yields may not be much better than what the banks are offering on certificates of deposit, but the flexibility to move in and out of the funds helps make up for that.

Still, if you've never been in a money fund before, some background may be in order. Unlike a stock fund, the net asset value, or share price, of a money fund never changes; it's a constant $1 a share.

Fund managers buy a variety of short-term financial instruments issued by corporations, banks, and municipalities. Most of these securities come in denominations of $100,000 to $1 million, too large for the average investor. But for $1,000 at most funds, you can buy a piece of several such instruments.

For more information on how money funds work, write Donoghue's Moneyletter, Dept. DP, Box 540, Holliston, MA 01746. Ask for a free copy of ``Crash-Proof Investing Through Money Funds.'' You can also call 800-445-5900 (in Massachusetts, call [617] 429-5930).

Insurance comes with credit card

The American Express Company is offering its domestic credit-card holders free limited insurance on almost any retail item charged on its card. The idea is to grab a bigger market slice of the lucrative holiday shopping season.

The company's Purchase Protection service comes about a year after American Express began its Buyer's Assurance program, which doubles, up to a year, the manufacturer's warranty on certain products bought with the card. The new service insures almost any retail item bought with an American Express card against fire, theft, accidental damage for up to 90 days.

So far the two big competing bank cards, Visa International and MasterCard International, say they have no immediate plans to offer similar services. They also dismiss the latest American Express program as a desperate attempt to bolster slipping market share.

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