Vern Hayden's AOL Chat

Author:
Publish date:

Vern Hayden chatted on AOL, Jan. 14 at 5:00 pm.m EST.

PF Trader:

Welcome, everyone, to another edition of TheStreet.com live on AOL. Tonight we have Vern Hayden, who is a financial planner. We'll discuss long-term investing in these volatile markets. Welcome, Vern.

Vern Hayden:

Hi, everyone, I am here, use me or abuse me! If you are talking about a recording artist, definitely not! If a bank certificate of deposit, they are guaranteed by the bank and the government up to $100,000.

Vern Hayden:

Generally speaking, other than under your mattress which is probably not safe at all... treasury notes are considered the safest because they have the full bank backing of the government.

Question:

What is your opinion on universal life ins. as part of my retirement plan?

Vern Hayden:

I am leery about the concept, primarily for two reasons: one, I am concerned about future changes in the tax law, that would no longer permit tax-free buildup of cash values or tax-free loans; two, I am concerned about an individual's ability to stop borrowing at the right time in order to keep the policy in effect. If the policy terminates, during your life, you would owe a tax on the difference between what you have versus what you paid in.

Question:

What should you look for in an investment broker?

Vern Hayden:

Honesty and for the one that is left... confidence! The real issue is competence. Only kidding about the one -- there are several out there, just hard to find one.

Question:

With the current problem in Brazil possibly spreading to other Latin America countries and adversely affecting the U.S., wouldn't it be prudent to pull out of stocks and lay low in money markets?

Vern Hayden:

I can't give you a precise answer but just a general opinion. I feel the entire year will be extremely volatile, and I would play it very conservative in '99.

Question:

After maxing out 401K's, what is the best way to minimize taxes within my prime working years? Large mortgage? Tax credits? Does the AMT kick in to negate any reduction from tax credits?

Vern Hayden:

I am not an accountant, so I can't give you any detail on AMTs. I would not carry a mortgage just for the tax deduction. You may want to consider doing a Roth IRA before fully funding a 410K plan.

Question:

I am 35 years old; what do you think would be my best route to retirement?

Vern Hayden:

To live until you are 65! A consistent investment plan using dollar cost averaging, into stock mutual funds over a long period of time works for most people.

Question:

Vern, I recently converted half of my 401K to a Roth IRA. Now, I'm worried that the U.S. might go to an alternative system (replace the IRS with e.g., a sales tax, like Australia has done). What are your feelings on this? Have I tossed my money out on taxes?

Vern Hayden:

Generally speaking, I think it is safe to do a Roth IRA. I think it will be some time before we have a value added or flat tax.

Question:

How do you feel about small cap funds for 1999?

Vern Hayden:

I don't believe all caps will show a significant rebound this year. During a period of volatility, domestic and foreign investors gravitate toward blue chip stocks. I know it is time for them to perform, and many are undervalued, but I feel anxiety overrides undervaluation.

Question:

When should you use a discount broker?

Vern Hayden:

When you don't need advice! Seriously, when you know what to buy or what to invest in, it is not necessary to pay the full price for a transaction.

PF Trader:

Also what would you look for when selecting a discount and/or online broker?

Vern Hayden:

Efficient and timely trades, that is the bottom line.

Question:

What is your opinion of the Vanguard Funds and GP?

Vern Hayden:

I have no idea what you mean by GP, but I think the Vanguard family is an excellent family.

Question:

The general recommended rule of thumb for diversifying your portfolio is have a % equal to your age in bonds and the rest in stock. Do you agree with this?

Vern Hayden:

Absolutely not! The founder of Pioneer group died last year at the age of 102, and he was asked that question at the age of 98 -- he said it was ridiculous and he never had less than 70% in stocks. I think age is irrelevant to allocation. In the sense of the formula mentioned.

Question:

How would you go about investing in foreign companies, i.e. Canadian?

Vern Hayden:

I don't have a complete answer, but AERs or a Canadian fund like Fidelity, Canada.

Question:

How do you think Wall Street is going to do in the year 2000?

PF Trader:

I think we're talking about Y2K here....

Vern Hayden:

I have no idea. I expect the Market to have a negative reaction at some point, because if there is a serious issue... I don't think the extremists on this question are correct, so I am not going to store food, but I am going to have accurate records and a few days of operating cash just in case.

Question:

How did you become a financial trader and why?

Vern Hayden:

I called myself a financial planner in 1972 and a Certified Financial Planner in 1978. Years of experience and study and classes have helped along the way.

Question:

What's the best way to invest short-term with the highest yield?

Vern Hayden:

Either short-term bonds or Certificates of Deposit. Or the kind of mutual fund like SIT, US Government Security Bonds.

Question::

Should I save college money for my kids in my name, or their name?

Vern Hayden:

I can't give specific advice, but I generally suggest initially in the parent's name. For good information on this subject, you may want to check out Octameron Associates¿ website at: www.octameron.com. They are a leading authority on planning for education.

Question:

Is investing in an IPO a good idea for the beginning investor?

Vern Hayden:

I generally would suggest they NOT do that. But instead, a good growth mutual fund.

PF Trader:

Folks, that's all the time we have today. Thank you, Vern, for taking the time to answer some questions for us. Good night.

Vern Hayden:

Good night all!

Copyright 1999 America Online, Inc. All Rights Reserved.