Keeping money in the family: a good idea
NEW YORK — Q. I am 80, retired, with an annual income of about $30,000. I owe $70,000 on my 30-year mortgage. I am 16 years into it. The monthly payment is $550, almost all in interest. I asked my daughter, who has the money, to pay off my balance due. I would then remortgage to her, at the same or higher interest rate, which is now 7.8 percent. She rejected the idea, saying she makes more on her present investments. Is mine a good idea, or what? D.T., Ajo, Ariz.
A. "Your idea is a very good one, assuming your daughter is willing to have a more conservative investment than she apparently currently has," says Gary Schatsky, a financial planner here.
"Keeping your money in the family instead of sending interest checks to the bank almost always makes a lot of sense. And for conservative investments, few quality bonds or bond funds will return a steady 7 or 8 percent over time."
But apparently your daughter has her money "in more aggressive investments, that are earning far more than 8 percent," Schatsky says. "Unless she does not really have the sufficient assets to acquire your mortgage, that probably explains her reluctance."
Q. How important is it to wade through a complicated prospectus when buying a mutual fund, so long as the fund is a good one and fairly prominent? K.A., New York
A. According to the Mutual Fund Education Alliance, in Kansas City, Mo., and the American Association of Individual Investors, Chicago, you should always take the time to examine a prospectus before buying into a mutual fund.
The prospectus gives you all the essentials about a fund: its address, phone numbers, sales charges (if any), and management or promotion fees.
It also tells you how to buy additional shares, redeem your shares, and the costs for switching from one fund to another if there are any.
And it carries annual performance data so you can see if the fund has been a consistent performer over time. If its gains mainly came from a few quarters within a year, the fund may have internal problems.
Finally, make certain you thoroughly understand the objective of the fund, as well as its risks.
Questions about finances? Write: Guy Halverson The Christian Science Monitor 500 Fifth Ave., Suite 1845 New York, NY 10110 E-mail: firstname.lastname@example.org