Online brokerages are not for everyone

Q. I keep receiving invitations to sign up with an online brokerage. Yet my wife and I seldom buy stocks. Should we put an initial deposit in this brokerage's money-market account? M.S., New York

A. Your hesitancy about shifting to the Internet "is understandable," says James Fraser, of Fraser Management Associates, in Burlington, Vt.

"The speed of the Internet is for people who do lots of trading, are very informed on stocks, or are 'casino-oriented,' " says Mr. Fraser. "If you trade only occasionally, I'd stick with a [traditional] broker with whom you can talk, and who can get you research material."

Q. My sister recently divorced. The judge awarded her a $50,000 lump sum alimony payment. My father is encouraging her to hook up with the life insurance company that operates his retirement IRA. But the alimony must be available to pay the mortgage and other monthly bills. What should she do? J.P., via e-mail

A"Have your sister do nothing until she sits down and sets up her financial goals," says David Caruso, a financial planner in Manchester-by-the-Sea, Mass.

"She will probably need to put the biggest part of the money in short-term accounts, such as a money-market account, a CD, or a conservative bond fund," he says.

Mr. Caruso recommends that, for mid-term needs (3 years to 10 years out), you invest in a blue-chip stock fund and a bond or balanced fund.

For the long-term (10 years out to retirement), consider a blue-chip or index fund, a small-cap fund, and an international fund, he says.

Q. Could you explain the stock "ratings" models used by investment houses. How does "accumulate" differ from "buy?" G.S., Los Angeles

A. Most brokerage houses use a variation of five ratings on individual securities: strong buy, buy, accumulate, hold, sell.

A "strong buy" means get it now - it's hot. "Buy" is positive, but with a tad less urgency. "Accumulate" is middle ground - pick up the stock over time, such as monthly. "Hold" means the stock has potential, but don't add it to your position now. "Sell" is just that.

Studies, however, show brokerage houses seldom give sell recommendations. Questions about finances? Write: Guy Halverson The Christian Science Monitor 00 Fifth Ave., Suite 1845 New York, NY 10110


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