Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 1, 1992 TAG: 9202010200
SECTION: BUSINESS PAGE: A-9 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
YOU'RE STUCK WITH INSURER
Q: After changing jobs, I decided to cancel a life insurance policy provided by my previous employer. I was informed that the insurance company, Executive Life of California, was bankrupt and I could not cancel my policy. Instead of returning the cash value, the company is applying the money to the monthly payments until the cash value is depleted. Is this legal?A: Executive Life is not bankrupt. It is in the hands of California regulators acting as conservators of the assets. The action you described is legal and, in fact, being taken by state authorities.
The state has found buyers for Executive Life and its situation should stabilize in the near future. Meanwhile, it is paying death claims but not refunding cash values.
Kenneth Schrad, spokesman for the Virginia Corporation Commission, said the agency's advice is for policyholders to continue paying premiums to companies in conservatorship if the policy is important to them. That is the only way to protect cash value built up inside a policy while the company undergoes state rehabilitation. If the insurance coverage is not important to you, you can let it go.
Keep it to $100,000
Q: I would like to know the ratings of the following banks: Crestar, First Virginia, Signet, Central Fidelity, Farmers & Merchants, Mercantile.
A: All statewide Virginia banks and those you mention meet government standards for capital strength. Even so, you should not keep more than the insured amount of $100,000 in any one bank.
A mutual formula
Q: I would like to calculate a percentage yield on my mutual fund investments for a figure I could compare to, for example, prevailing CD rates or the movement in the S&P 500. Of course, there are several magazines that publish mutual fund yields annually. Those figures give you an idea of how the fund managers did and are fine for comparing different funds.
What I want, however, is a formula that will take into account the purchases and redemptions I made during the year. I have found formulas that will work if a uniform amount is invested at uniform intervals, but I can't find a formula that will take into account varying amounts invested and redeemed at irregular intervals. I have a personal computer and can program in several languages.
A: Total return is the important figure for a mutual fund, and Kiplinger's Personal Finance magazine has a formula for that.
People who buy and sell shares must begin with the ending value of the fund and add in the unreinvested income. From the resulting figure, subtract half of the net additions. That gives you Subtotal A.
Then take the beginning balance of your fund and add the other half of the net additions for Subtotal B.
Then divide Subtotal A by Subtotal B, subtract the figure 1 and multiply by 100 to get total return.
Anyone who doesn't want to (or can't) program this formula can purchase a total return program on existing software. Kiplinger's recommended PFROI, sold by Techserve, as the most accurate.
Of German funds
Q: Is there a United States mutual fund, preferably a no-load fund, that invests only in German Treasury securities? If not, is there any way a small investor who buys bonds in $10,000 to $20,000 lots can buy German Treasury securities through brokers? The current rates on United States Treasury securities are a ripoff of investors.
A: John Collins, spokesman for the Investment Company Institute, a Washington, D.C., trade association, knows of only one fund similar to what you mentioned. That is the Deutschemark Fund of Fidelity Investments. The information phone number is 1-800-544-8888.
A Fidelity spokesman said the fund attempts to simulate the German deutschemark by investing in money market instruments and currency contracts denominated in the deutschemark. The minimum investment is $5,000. The fee is 0.4 percent for investments under $25,000, 0.3 percent between $25,000 and $100,000 and 0.2 percent above that amount.
Also, large brokerage houses keep an inventory of the bonds of other countries, including Germany.
Stephen Williams, vice president and Roanoke branch manager at PaineWebber, advises the average investor against foreign bonds even though his company sells German Treasuries. The risk of those and other foreign investments is currency fluctuation, he said. Currencies are volatile today. If your bond pays 9 percent but the deutschemark shifts 5 percent, he said, you have gained only 4 percent.
He suggested investing in a global bond mutual fund that has a portfolio of government securities from many nations. Such a fund offers professional management, diversification and a hedge against currency fluctuations.
Mag Poff covers banking and finance for the Roanoke Times & World-News. She will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke, Va. 24010.