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.

Questions and Responses

How do I determine a fund's correlation?

Are rollovers included in the basis of your IRA?

How can I best preserve my capital?

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How do I determine a fund's correlation?

from B.E.

Q: I know that to take advantage of the benefits of diversification I should select mutual funds for my portfolio that have low correlations.  How do I determine their correlation with the information that is given?

A: Unfortunately, that is not easy to do. I would suggest contacting Morningstar to determine if they can supply this information. The other option is to obtain a textbook that shows how to calculate cross correlations.

What do I do now that my former company is doing away with my retirement plan?

from Jeff

Q: A company where I worked for 10 years and have some retirement funds with are doing away with their current  retirement program. (I believe it is some type of pension plan, not a 401K plan.)  I have been informed that I will need to decide what I wish to do with my retirement funds. 

These funds currently represent the largest part of my retirement savings.  What should I do?  I have never invested in stocks, annuities or mutual funds before and am uncertain of any benefits I might gain from either of these, nor can I afford to risk a large portion of my funds. 

A: What you'll need to do is to roll over the monies in the plan to an IRA Rollover account, and not a regular IRA. I would also suggest interviewing a number of advisors. You can obtain some names through this web site as well as contact the National Association of Personal Financial Advisors, (www.napfa.org) the fee-only organization.

Whoever you choose as an advisor, don't rush into it. Park your monies within a money market fund until you have selected an advisor that you are comfortable with.

How can I best preserve my capital?

from Mrs. V.

Q: I have about $40,000 left in my Roth account. I would like to know which funds I should have in there to preserve what's left of my capital and will grow safely. Also, should I only have funds in there?

Right now I am in Janus growth & Income, Oppenheimer Quest Balanced Fund and Van Kampen VK Comstock.

A: The funds you have are basically average and unless you have a substantial amount of other assets, I would not consider using anything other than mutual funds. Funds I would suggest are the Leuthold Core Investment, Dodge and Cox Balanced, Cohen and Steers Reality Shares, Tweedy Browne Global, and/or Merger Fund.

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.