Fool Portfolio Report
Friday, June 6, 1997
by David Gardner (MotleyFool)

ALEXANDRIA, VA, (June 6, 1997) -- The Standard & Poor's 500 rocketed forward 1.74% Friday, pulling up the Nasdaq with it (up 1.06%) and, to a lesser extent, the Fool. But we lost to the market today, up only 0.77%. Darn. Fortunately, we did post a strong week with returns of 3.15%, a couple percentage points ahead of the averages. For the year:

S&P 500: 15.83%
Nasdaq: 8.82%
Fool: 5.81%

In other words, we currently sit 10 points behind the S&P and 3 points behind the weaker Nasdaq... somewhat in keeping with our ongoing expectations that we won't do so well in anti-tech times. Hey, we're still aiming on beating the market in 1997, as we're still less than halfway through the year. If we have another week like this one, we'll pass the Nasdaq with our sights set squarely on the S&P 500's bumper. Then it's "VOOOOOOOOOOM!" go the engines, followed by a comparatively silent "Whoosh" as we gun past the market for the fourth year in a row. (OK, I'm getting ahead of myself. Nasdaq first.)

The most distinctive move today came from ATC COMMUNICATIONS (Nasdaq:ATCT), rising $1 to bid $5 5/8 on big volume (one million shares, twice normal). We couldn't find any news on the wires, but a check of our ATCT message folder may reveal the reason: TeleChart 2000 (the charting software and online site) featured ATCT last night. Its technical analysis suggested the stock was "oversold," and the report pointed out the P/E was only 14 despite annual sales up 69% and a five-year estimated growth rate of 25%.

While I tend to ignore technical "oversold" ratings, I do agree that the company has been unfairly beaten down despite its growth (albeit, under projections) and its prospects. We'll see if there's more follow-through next week.

I did like one post by "TT in Ala" who said, "You do not need to guess [regarding reason for ATC's rise]. It must be Buffett! Rumor said he also bought Nike. Good one. Better perhaps was Yumski, who retorted, "Jimmy Buffett."

KLA Tencor, Lucent, and Les Deux Trois (3M and 3Com) all rose more than a buck today as well, helping out the Fool Port.

Debuting today are a few new stock ideas that also went up a buck, in our new Stocks for Dad special. Father's Day is a week away, but at Fool HQ we're always planning ahead. If you're looking for a Father's Day gift, you should probably click in there and look! And if you are a father this thing's clearly for you: "Stocks for Dad." (Actually, if you are looking for a Foolish Father's Day gift, click in to FoolMart this weekend for our Dad's Day specials... this weekend's the last chance to order and receive the thing by Father's Day.)

Now, from time to time we Fools like to push all the chairs to the edges of the room and do a personal finance hoedown. And now is one of those times. So ladies, gents, and Fools, let's hitch up our skirts, shine our belt buckles, start up the music, and talk about 401(k) plans!

The 401(k) Hoedown

"Ah, spin yer partner round and round, and it's time to do a dosi-do! So let's talk 401(k) my friends, link hands to the left, link hands to the right, and promenade around this text!"


If you have a job in the private sector, you should have a 401(k) plan. These savings vehicles are all the rage these days, and will go on to fund the retirements of many Americans into the next century and beyond. Given their tax advantages, and the possibility of corporate matching (read: FREE MONEY), they are well worth considering.

Here's the way the 401(k) works: You commit to contributing a specified portion of your salary to the plan, which is automatically deducted from your paycheck. The amount contributed and the earnings coming from it accumulate tax-free until withdrawn. And that's the sweet thing about retirement plans; the tax-deferred nature of this investment is highly attractive. Here's why: By not having to pay taxes on capital gains year in and year out, your money grows to far larger amounts over your employment life. Then, when it's eventually time to withdraw the money and pay the taxes, you'll have a lot more left over at the end.

When do you withdraw? In general, a 401(k) plan limits withdrawals to five occasions: Reaching the age of 59 ½, retirement, termination of employment, disability, and death. (Our favorite one there has to be "reaching the age of 59 ½.") Additionally, the plan may include provisions for loans and hardship withdrawals.

The single best reason to use a 401(k) or retirement plan is if your employer matches your contribution. For every buck you toss in, some employers toss in some additional bucks too. (Say it again: "FREE MONEY!") You'd be a fool (small "f") not to take advantage of that. A typical matching policy involves your employer adding an additional 50 percent of whatever you contribute, up to a specified percentage of your compensation. Say, 6 percent.

Thus, if you make $30,000 a year and have a plan allowing you to contribute up to 10 percent of that to your 401(k), it'd work like this. You should probably contribute the maximum (fully exploiting the tax deferment), making $3000. Six percent of your total is $1800, and it is that amount to which your employer contributes $900 (50 percent of $1800). So you just got a free nine hundred petunias to plant alongside the other three thousand. Looked at in another way, that's an immediate 30% gain on your untaxed investment! We all should be so lucky.

Some employers may alternatively share a portion of the firm's annual profits in the form of independent contributions to your 401(k). That's called profit sharing. Another good deal.

Now, what can you put the funds into? Well, here's where the "qualified" part of our "qualified yup" comes in. You want to invest in stocks? Sorry! Or at least, not directly. The standard 401(k) plan has limited options, mainly mutual funds and more conservative income vehicles (things like "guaranteed fixed-rate income funds" - yuck!). A typical plan will offer a selection of a money market fund, a bond fund, and a stock fund.

You already know our feelings about mutual funds. Given those feelings, we strongly encourage you just to stick with the index fund, if it's one of your plan's options. If it's NOT one of your plan's options, it's time to take your plan manager out to lunch and schmooze the afternoon away. Alternatively, or in addition, you could present him or her a free copy of The Motley Fool Investment Guide. You'll be doing yourself and your co-workers a great service, and making the world just a little bit more Foolish.

Questions about this plan, or other retirement planning? Shoot 'em right into our excellent Retirement Investing folder, hosted by the pre-eminently Foolish TMF Pixy.

And have a square-dance of a weekend. Fool on!

--- David Gardner, June 6, 1997

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Stock Change Bid -------------------- AOL - 3/8 57.13 T + 1/8 35.63 ATCT +1 5.63 CHV + 1/4 72.25 DJT + 1/8 9.88 GM - 1/4 56.63 IOM - 1/8 20.13 KLAC +1 5/16 47.56 LU +1 3/8 64.88 MMM +1 1/2 92.50 COMS +2 1/16 46.25
Day Month Year History FOOL +0.77% 3.15% 5.81% 182.40% S&P: +1.74% 1.15% 15.83% 87.17% NASDAQ: +1.06% 0.32% 8.82% 95.07% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 20.13 698.61% 8/5/94 355 AmOnline 7.27 57.13 685.76% 8/11/95 125 Chevron 50.28 72.25 43.68% 8/12/96 110 Minn M&M 65.68 92.50 40.84% 10/1/96 42 LucentTech 47.62 64.88 36.25% 8/12/96 280 Gen'l Moto 51.97 56.63 8.95% 8/24/95 130 KLA Tencor 44.71 47.56 6.38% 8/13/96 250 3Com Corp. 46.86 46.25 -1.30% 8/12/96 130 AT&T 39.58 35.63 -9.99% 4/30/97 -1170 *Trump* 8.47 9.88 -16.60% 10/22/96 600 ATC Comm. 22.94 5.63 -75.48% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 20279.38 $17697.51 5/17/95 980 Iomega Cor 2594.53 19722.50 $17127.97 8/12/96 110 Minn M&M 7224.44 10175.00 $2950.56 8/11/95 125 Chevron 6285.61 9031.25 $2745.64 8/12/96 280 Gen'l Moto 14552.49 15855.00 $1302.51 10/1/96 42 LucentTech 1999.88 2724.75 $724.87 8/24/95 130 KLA Tencor 5812.49 6183.13 $370.64 8/13/96 250 3Com Corp. 11714.99 11562.50 -$152.49 8/12/96 130 AT&T 5145.11 4631.25 -$513.86 4/30/97 -1170*Trump* -9908.50 -11553.75 -$1645.25 10/22/96 600 ATC Comm. 13761.50 3375.00-$10386.50 CASH $49211.92 TOTAL $141197.92