Mutual funds hot stocking stuffers
Investments provide children lasting gift
The Associated Press
NEW YORK - Instead of another video game or scarf-and-mittens set, many financial advisers are talking up mutual funds as a holiday gift suggestion for children this year.
No, the little ones' eyes probably won't light up with joy when they find a share-purchase confirmation statement in their stockings.
But the idea is right in tune with the 1990s theme of savings and investment, rather than consumption. While funds don't provide much instant gratification, they are one of the hottest products in the American marketplace.
"Your present really becomes the gift of a lifetime," said Stein Roe & Farnham, a Chicago firm that runs a family of 15 mutual funds with combined assets of almost $30 billion.
Marketing officials at many fund organizations have taken steps to package their wares for easier use as gifts.
The up-front cost can be one big obstacle, with minimum initial investments in many funds running in the $1,000 to $2,500 range. But some groups set lower minimaus for gifts to minor children, just as they do to start individual retirement accounts.
Indeed, more and more funds now are willing to open accounts with low or no minimum antes, as long as you agree to some sort of systematic investment plan of as little as $25 to $50 per month.
If a child has income from a job of any sort, perhaps the gift can be given in the form of an IRA. This may have the advantage of reducing or negating any federal income tax on the child's work-related earnings, and provide for tax deferral as the value of the account grows in future years.
A more common approach, usually better suited to purposes such as college savings, is to set up a custodial account under the Uniform Gift to Minors Act.
"The mutual fund shares are registered in the name of an adult (usually the parent) as custodian for the child," said Porter Morgan at the Liberty Financial Cos. in Boston. "While the child is still a minor, the parent would exercise investment control.
"Small gifts of mutual funds while the child is young can make a big difference when the child is ready for college.
"For example, a $5,000 gift from a grand-parent to a 3-year-old would grow to over $20,000 in 15 years if the fund produced an average return of 10 percent per year, and to over $60,000 if an additional $100 per month was added to the account."
Aside from tax considerations, investing early in life gives access to the power of compounding, which can be prodigious if it is given enough time to work.
"Investing systematically has another benefit as well," said the United Mutual Fund Selector, an advisory letter based in Wellesley Hills, Mass.
"Besides being a disciplined form of investing, by committing regular dollar amounts over an extended time you participate in a dollar-cost-averaging program," the letter said. "You will buy more shares when the fund's net asset value is down, and fewer when NAV is higher."
German television station raises conflict on first day
The Associated Press
BERLIN — Germans tuning in to a new U.S.-backed local TV station on its first day could watch a religious service, a horse race, a Gina LoHobrigida movie, David Janssen in "The Fugitive" — and commercials.
The competition is not happy.
Claiming to be the first local commercial station in Germany, 1A is aimed at the 6 million people in the German capital and surroundings. Berlin Mayor Eberhard Diepgen pushed a button to start the broadcast Nov. 28 and wished 1A "good cooperation" with Germany's big public broadcasters.
The first comment from that sector, however, was negative.
A report on ZDF, one of two public channels funded by viewers' fees, cast a sharply questioning eye on the style of American commercial TV and on the ambitions in Eastern Europe of the U.S. backers of the new station.
"Could it be," asked Luiza Braun, host of the "Aspekte" culture program, "that this American way of broadcasting, though it is presented so democratically, has totalitarian aspects?"
Never before have so many people in the world been able to see the same films, read
the same books, hear the same music and watch the same television, Ms. Braun said, adding that that was a quote "not from Comrade Stalin, but from Time-Warner," the U.S. media company that owns about 22 percent of 1A.
The same portion is held by Hungarian-American financier George Soros.
CEDC, a company headed by former U.S. Ambassador to Hungary Mark Palmer, owns about 43 percent. A German commercial radio pioneer, Ulrich Shamoni, holds 10 percent, and a Munich-based firm has a small share.
Palmer, whose company also is building
an office complex in Berlin at the site of the former Checkpoint Charlie, called the ZDF commentary "ludicrous," "amusing" and "annoying."
In a telephone interview, he said 1A will have less American programming than the public networks or the national commercial networks, which have pulled ahead of the public broadcasters in audience ratings.
"The success of local television is to be close to the local market and try to figure out what interests people have and provide that," Palmer said. "We're a typical local station, with lots of local features, local sports and local advertising."
COMMUNITY • K-you • December 8,1993
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