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Personal Finance: Stocks for fun and profit

; New York Vol. 4, Iss. 8,  (Apr 30, 1995): 15.
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Personal Finance: Stocks for fun and profit.

By Charles Ross

Investing your money should be neither a bore nor a chore. Mutual funding can help you increase your wealth without a lot of worry. But taking a little risk can be a thrill to many investors who enjoy picking individual stocks. The compromise is to build a solid portfolio of mostly funds with a small amount of individual stocks.

You should limit your individual stockholdings to 10 percent of your overall portfolio, and no more than 20 percent of the equity portion. By limiting your direct stock holdings, you lower the chances that a couple of bad choices will crack your nest egg. You should invest in not more than five different companies.

Good leads can come from anywhere, friends, a stockbroker or the news media. If you have a hobby, you may want to invest in companies in that field.

Threats to Retirement Not Saving Enough

A major threat to a comfortable retirement is the danger that you will not have saved enough. A recent survey reveals that employees who save through a 401 (k) plan put in 5 percent of their salaries each year. But this may not be enough.

If you save 5 percent a year for 40 years, that will only be enough to yield an amount that will earn 35 percent of your income for retirement. Most people need to save close to 10 percent or more in order to replace 90 percent of their salary.

In the 1970s Americans saved closer to 10 percent a year. Currently, the U.S. savings rate stands at around 4 percent. The Japanese save over 12 percent and the Germans 8 percent.

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