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Cash-King Port

The Cash King Portfolio has been renamed the Rule Maker Portfolio.

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11 Steps:
 1: Philosophy
 2: Mastering Finances
 3: Allocating Savings
 4: Finding Ideas
 5: Getting Information
 6: Cash-King Criteria
 7: QuaVa & Flow
 8: Ownership
 9: Putting It Together
10: Retirement
11: Getting Answers

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Related Items

• Hall of Portfolios
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• Rule Maker Port
• Boring Port
• Drip Port
• Foolish Four Port
• Harry Jones


Foolish 4 Holding Period
by Al Levit
(alanl@ix.netcom.com)

Glendale, CA (June 17, 1998) -- Hear ye, hear ye! There's one day left for the C-K Online Poll. We have over 2,100 votes since the poll opened on Monday -- and we expect another few hundred through tomorrow. If you haven't voted, drop by the poll and help us choose our 8th Cash-King stock (click here: Motley Fool and C-K Online Poll.)

Today is Wednesday, and that means we answer questions from the message boards. I've also been gone for a while, busily writing away on Social Security (a feature that will appear in Fooldom coming soon), and I need to make a few, er, enhancements on some of the comments I made in a couple of columns I wrote in April. Ok, on to the first question:

The Foolish Four Holding Period

The first question I'll cover today, which conveniently ties into one of my enhancements, comes from George, writing under the name of "mosaics" on the Web. He writes:

"In the intro to the Cash-King portfolio where you guys suggest a combination of Dow stocks with Cash-King investments, I read:

With the Dow stocks, we'll rotate our holdings every 18 months to take advantage of the reduction in long-term capital gains rates.

Hey, I thought the Foolish Four and other Dow Approach portfolios were based on annual re-allocations. What have I missed?"

George, you missed some recent changes to the tax laws and subsequent alterations that were made to the approach by Foolish researchers in the forum. Originally, the Foolish Four was based on annual re-allocations. But then our capital gains tax laws were changed, making it more favorable to hold investments for more than 18 months.

Today, investments held for more than 12 months but less than 18 months are taxed at a maximum rate of 28%. (Gains from investments held less than 12 months are taxed at your normal income tax rate.) And, long-term investments -- held for more than 18 months -- are taxed at 20%. The savings that can be had by holding for the longer period is significant. So a few diehard Fools began backtesting the numbers to see how the approach did over periods longer than 18 months.

Unfortunately, after a lot of backtesting work by a group of people, Robert Sheard published a Foolish Four column suggesting that there were some problems with the 18-month rotation. The work showed that the return from Foolish Four investing, including the RP variation that we're using in the C-K Portfolio, is much higher when stocks are bought in December or January.

Obviously, an investor can't consistently buy these stocks in December or January, while rotating positions every 18 months. So Bob Price (TMF Sandy), the Foolish Four numbers man, is working hard right now on this seasonality phenomenon as we speak. My sense is that in our portfolio, we'll be moving to a 24-month holding period, with our four Dow stocks being purchased in mid-December every two years.

Telemarketers

My column back on April 17 about telemarketers really struck a nerve. The mail poured into both my personal mailbox and the Cash-King message board on the Web. Many of the ideas for driving away unsolicited phone salesman were hilarious. I encourage anyone who hasn't had a chance yet to stop by the C-K message folder and enjoy them. However, I would like to give special recognition to vodkajim, who wrote:

I used to be a "financial services specialist" (aka Life Insurance and Mutual Fund Salesman) for a few months. I had to make those horrible cold calls and I hated every minute of it. Here's some advice from the other side:

...Legally, companies making such calls are required to keep a "Do Not Call" list. A company that you have no previous business relationship with is forbidden from calling you at home again if you ask to be added to their "Do Not Call" list. This is the only way to prevent them from calling back in the future. For more info, click:

What you can do about unsolicited phone calls

The best way to make them hang up is to NOT RESPOND to them. Be quiet, put the phone down and walk away, whatever. If you can't hear their sales pitch, they're wasting their time. Foreigners who can't speak English and elderly people who can't hear what the telemarketer says are the worst people for a cold caller to try to talk to. Be just such a person. Have fun with it.

Since reading VodkaJim's advice, I've changed my tactics for dealing with telemarketers. I like to combine an unpracticed Belorussian accent with an immediate request that they put me on their "Do Not Call" list. It's a good deal of fun. I actually WANT them to call me now!

That's all for today. Following Part 1 yesterday, tomorrow we return to Part 2 of my review of The Gorilla Game. Until then,

Fool on,

Al


TODAY'S NUMBERS
Stock  Change    Bid 
 ---------------- 
 AXP   +3 9/16  104.94 
 CHV   +2 7/16  83.69 
 KO    +1 5/16  80.31 
 GPS   +  7/8   58.88 
 EK    +  15/16 68.13 
 XON   +1 7/16  71.00 
 GM    +  7/8   69.75 
 INTC  -  9/16  69.19 
 MSFT  +1 1/8   91.00 
 PFE   +2 9/16  112.25 
 TROW  +1       34.75 
 

                  Day   Month    Year  History 
         C-K      +1.68%   2.21%   8.09%   8.09% 
         S&P:     +1.80%   1.49%  10.57%  10.57% 
         NASDAQ:  +1.33%  -0.14%   7.47%   7.47% 
  
 Cash-King Stocks 
  
     Rec'd    #  Security     In At       Now    Change 
     2/3/98   22 Pfizer        82.30    112.25    36.39% 
     2/3/98   24 Microsoft     78.27     91.00    16.27% 
    2/27/98   27 Coca-Cola     69.11     80.31    16.21% 
     5/1/98   37 Gap Inc.      51.09     58.88    15.24% 
     2/6/98   56 T. Rowe Pr    33.67     34.75     3.20% 
    5/26/98   18 American E   104.07    104.94     0.84% 
    2/13/98   22 Intel         84.67     69.19   -18.29% 
  
 Foolish Four Stocks 
  
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Exxon         64.34     71.00    10.36% 
    3/12/98   20 Eastman Ko    63.15     68.13     7.88% 
    3/12/98   15 Chevron       83.34     83.69     0.41% 
    3/12/98   17 General Mo    72.41     69.75    -3.67% 
  
  
 Cash-King Stocks 
  
     Rec'd    #  Security     In At     Value    Change 
     2/3/98   22 Pfizer      1810.58   2469.50   $658.92 
     2/3/98   24 Microsoft   1878.45   2184.00   $305.55 
    2/27/98   27 Coca-Cola   1865.89   2168.44   $302.55 
     5/1/98   37 Gap Inc.    1890.33   2178.38   $288.05 
     2/6/98   56 T. Rowe Pr  1885.70   1946.00    $60.30 
    5/26/98   18 American E  1873.20   1888.88    $15.68 
    2/13/98   22 Intel       1862.83   1522.13  -$340.71 
  
 Foolish Four Stocks 
  
     Rec'd    #  Security     In At     Value    Change 
    3/12/98   20 Exxon       1286.70   1420.00   $133.30 
    3/12/98   20 Eastman Ko  1262.95   1362.50    $99.55 
    3/12/98   15 Chevron     1250.14   1255.31     $5.17 
    3/12/98   17 General Mo  1230.89   1185.75   -$45.14 
  
                               CASH   $2037.63 
                              TOTAL  $21618.51 
   
 *The year for the S&P and Nasdaq will be as of 02/03/98 
       

</THE CASH-KING PORTFOLIO>

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