This week's answers come from:

Lou Stanasolovich

Louis P. Stanasolovich, CFP is Founder, CEO, and President of Legend Financial Advisors, Inc. (Legend), a fee-only financial advisory firm with its headquarters located in Pittsburgh, Pennsylvania.  Legend provides Wealth Advisory Services, including Comprehensive Financial Planning and Investment Management, to affluent and wealthy individuals as well as business entities.  Mr. Stanasolovich has been selected by Worth Magazine as one of “The 250 Best Financial Advisors in America” five successive times, by Medical Economics as one of “The 150 Best Financial Advisors in America for Doctors” three consecutive times and most recently by Mutual Funds magazine as one of “The 100 Great Financial Planners in America” in its October, 2001 issue.  His investment process has been profiled in Barron’s, Business Week, Investment Advisor, Investment News, Morningstar Investor, USA Today, Worth, and on the Internet publication TheStreet.com.  He can be reached via e-mail at legend@legend-financial.com, via the website - www.legend-financial.com, or at (888) 236-5960.

What's a good strategy to achieve a modest return with less risk?

How should a custodian monitor a parent's Keogh account?

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What's a good strategy to achieve a modest return with less risk?

from Bob

Q: My wife and I are 60 and 56 years old, respectively, and have a guaranteed income that will suffice for our life style. In addition, our portfolio is in excess of $250k. We are thinking of going to a no-load mutual fund for a modest return and a somewhat safer investment program. Do you have any suggestions?

A: Generally, no-load mutual funds are almost always a sound method of investment.  But as with everything, there are good and bad. I would suggest when evaluating a mutual fund that you look at its Morningstar category rating as opposed to it's star rating.  The category rating is more consistent because it evaluates how a fund does versus it's true peers as opposed to, for example, all equity domestic funds.  A category may be out of favor for a few years but if the fund has a 4 or 5 rating within the category, the fund will probably be one of the better ones over the long run.

It is best to build a portfolio of non-similar performing funds.  Five to ten funds including bond funds that are non-similar will probably do the job.  However, as basic building blocks, I would suggest starting with the Merger Fund and Leuthold Core Investment Fund.  They have significantly less volatility than the S & P 500 yet should be competitive with regards to returns over a ten year period.

How should a custodian monitor a parent's Keogh account?

from Mitzi

Q: I am seeking information regarding guidelines and options for mandatory Keogh distribution. As a custodian for a Keogh, how would you monitor that your beneficiary/account holder is withdrawing adequate funds. I know that with a IRA you may figure annual distributions by single or joint life expectancy.

How is a Keogh calculated? The beneficiary/account holder is 78, married, spouse is 74. The amount in his Keogh (retired physician) is approximately $200,000.00. Please reply ASAP. We are in the process of completing estate planning for my parents.

A: First of all, I would suggest rolling over the defined contribution retirement plan (formerly known as a Keogh Plan) into an IRA rollover account to facilitate distribution planning if your father's state of residence provides asset protection laws for IRA rollover accounts. Not all states do.

IRA rollover accounts are significantly more flexible with regard to distribution planning than retirement plans. Also there are certain aspects of IRA's that are somewhat too obscure to go into too much detail here that make IRA Rollovers a bit better vehicle than defined contribution retirement plans.

However, if your father's state of residence does not provide asset protection for IRA rollovers then leave the retirement plan as is. The rule as to the minimum distribution requirements are essentially the same.

I would also suggest that the actuary that administers his retirement plan can assist with the calculation of the distributions from the plan if the money is going to get rolled over to an IRA Rollover Account. If he doesn't have an actuary that administers the plan; retain one immediately. Almost always if an actuary is not being utilized for plan administration, the plan will probably be out of compliance.

Important Disclaimer

Investing in equities involves a serious principal risk, and no assurance can be given that the techniques described here will be successful. Returns vary and you may have a gain or loss when you sell your shares. Past performance is no guarantee of future results. Index returns shown are historical and include the change in share price, reinvestment of dividends, and capital gains. Indexes are unmanaged and do not reflect the impact of transaction costs. Transaction costs would have reduced the total returns.

International investments, especially those in emerging markets, entail greater risks (as well as greater potential rewards) than U.S. investing. These risks include political and economic uncertainties of foreign countries, as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less-established markets and economies.

Lastly, the questions and responses set forth here are for general informational purposes only and are not intended to substitute for performing your own independent research or contacting your financial or legal professional before making any investment decisions. We make no guarantees as to the performance of any investment strategy you choose and are not responsible for any losses you might incur.