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BUS0208-A-F B@6 -Composite Proof 2/7/04 0:00 0:00 R F6 BlueRedYellowBlack 6F FBUS0208OF6 RBUSB0208OF6 RBUS0208OF6 R Sunday, Feb. 8, 2004 / The Atlanta Journal-Constitution 3 YourMoney YO U R W E E K LY P E R S O N A L F I N A N C E G U I D E Check out the new features on our personal finance page, ajc.com/money ON A JC.COM By the numbers +1.0%: Dow gain last week -0.1%: Nasdaq loss last week +1.0%: S&P 500 gain last week Individual stocks can boost portfolio Q: I’ve considered investing THE MOTLEY FOOL in stocks for sometime, but I’m invested in mutual funds that are fairly diversified. Is there added value in investing in individual securities? — M.R., Bonaire Early start on college 230 private schools champion new plan By HANK EZELL hezell@ajc.com A: It’s good to be diversified, but many mutual funds are more diversified than you probably need to be, as they’re often invested in several hundred different securities. An advantage to putting a chunk of your investing money into individual stocks is that if a given stock appreciates in value, it will make a significant difference in your portfolio. Of course, the trick with picking your own stocks is that you need to know what you’re doing. For those who don’t, it’s smart to opt for mutual funds managed by trustworthy professionals or index funds that automatically mirror the market. TOM and DAVID GARDNER fool@ajc.com ➤ FOOL’S SCHOOL Credit reports If you plan to apply for credit in the near future, be sure to review your credit report first, so you can catch and correct any errors. Better still, guard against identity theft by reviewing your credit report regularly and looking for signs of unauthorized activity. To get a copy of your credit report, contact any or all of the three main bureaus that keep credit records: ➤ Equifax (1-800-685-1111, www.equifax.com) ➤ Experian (1-888-397-3742, www.experian.com) ➤ TransUnion (1-800-8884213, www.transunion.com) You’re entitled to a free copy of your credit report if you live in Georgia or certain other states, or are within 60 days of being denied credit, employment, insurance or rental housing. Otherwise, it may cost up to $9 per report. It’s smart to get your report from all three bureaus, as some may have information that others don’t. (Right now, TrueCredit is offering Fool readers a special $5 discount on a combined credit report from all three bureaus, plus a copy of your credit score. Visit www.truecredit .com/fool for details.) If there are errors on your credit report, you can have them corrected. Somewhere in the report, often at the end, there should be instructions on how to dispute anything that you believe is an error. If the report contains information that’s negative but accurate, you can expect that to remain on your report for seven to 10 years. You can still lessen the sting of that information, though, by paying your bills on time. Credit issuers tend to give more weight to your recent billpaying history. Fixing mistakes on your credit report, maintaining a good credit history and guarding against identity theft can make your life easier. Learn more about credit issues at www.fool.com/ccc /ccc.htm and www.ftc.gov /bcp/menu-credit.htm. For copies of Federal Trade Commission brochures on credit issues, call 1-877-382-4357. To learn more about how to prevent identity theft, click over to www.ftc.gov/bcp/conline /pubs/credit/idtheft.htm. Send questions for “Ask the Fool” to Fool@ajc.com or via regular mail to The Atlanta Journal-Constitution, Box 4689, Atlanta, GA 30302. Mark the envelope: Attention: Motley Fool. RATEWATCH: MAKING YOUR MONEY WORK Deposit annual percentage yields and loan rates paid during the past week by some thrifts and credit unions in the Atlanta area that would provide the information. Yields are based on the minimum to open an account; new car loan rates are based on $22,000 for four years and home equity lines on the minimum amount that can be borrowed. Some institutions may restrict deposits to certain areas. Money Int. Auto Home mkt. chkg. loan equity yield yield rate rate 1.21 0.50 NA NA 1.36 0.25 5.75 4.00 NA 2.00 5.50 4.00 0.30 0.25 9.50 5.50 0.20 0.10 7.50 5.00 0.40 0.10 6.95 5.50 0.10 0.10 6.39 5.50 0.75 0.25 6.25 5.00 2.01 2.01 NA NA 0.25 0.10 NA 6.75 0.66 0.35 7.00 4.25 0.75 0.75 6.75 5.50 0.40 0.35 6.95 5.00 0.40 0.40 6.75 5.00 0.50 0.50 5.55 4.25 0.50 0.50 NA NA 0.75 0.25 NA NA 0.25 0.25 8.00 5.50 2.00 0.32 NA NA 0.50 0.25 6.75 4.25 0.50 0.50 7.00 5.00 NA 0.30 3.25 4.50 0.50 0.25 8.00 6.00 0.60 0.35 7.50 6.00 0.80 0.50 7.50 6.00 0.50 0.50 6.50 4.50 0.80 0.40 7.75 6.00 0.25 0.10 6.95 4.50 2.01 NA NA NA 0.15 0.10 7.75 6.00 1.00 0.50 6.75 5.00 1.80 1.20 NA 4.50 0.40 0.50 6.50 5.50 0.25 0.10 NA NA 0.25 0.50 7.00 6.25 1.75 1.75 7.00 4.00 0.30 1.50 8.75 NA 0.10 0.15 6.65 NA 0.50 0.20 6.74 6.00 1.40 1.35 5.99 NA 0.20 0.10 9.50 5.50 0.20 0.10 7.75 5.75 0.25 0.10 6.75 5.00 1.21 1.06 7.00 5.00 0.25 0.10 8.24 5.50 0.68 0.50 7.01 5.19 Credit card rate NA 12.00 12.90 18.00 NA 11.90 7.90 10.65 NA 12.15 NA NA 10.15 NA 10.90 NA NA 13.90 NA NA 10.24 9.99 12.65 NA 14.90 10.65 10.15 9.90 NA 11.90 8.90 15.40 10.65 NA 10.90 10.65 NA 12.99 9.90 11.65 11.99 15.40 12.65 10.15 10.24 11.69 General phone number 678-338-2265 770-448-8200 404-768-4126 800-273-4732 800-299-2265 770-751-4700 800-226-5228 770-963-9225 404-752-6067 770-423-2265 770-650-8262 770-479-3400 770-436-4567 770-472-5020 404-248-5466 770-921-6400 678-432-9698 770-662-5050 770-984-9091 770-667-7899 678-631-1240 404-874-0777 770-943-1400 770-457-5858 770-476-3809 770-932-7780 770-777-0324 404-214-3350 678-852-9596 770-491-8808 770-343-6255 888-256-6932 678-277-8400 770-396-0000 404-926-2400 800-533-6922 770-908-6400 404-255-8550 800-225-5782 877-734-2265 800-846-4786 770-267-6511 770-814-8100 404-240-0101 800-922-4684 Name American Trust Bank Associated Credit Union Atlanta Postal CU Atlantic States Bank Bank of America Bank of North Georgia BB&T Brand Banking Co Capitol City B&TC Charter Bank Chattahoochee Natl Bk Cherokee Bank Community Bank of the South Community Capital Bank Fidelity Bank First Capital Bank First Georgia Community Bk First Security Natl Bank Flag Bank Futurus Bank, NA Georgia Commerce Bank Georgia Telco CU Georgian Bank Global Commerce Bank Gwinnett Community Bank Homestead Bank Integrity Bank Main Street Bank Metlife Bank Mountain National Bank Neighbors Bank NetBank North Atlanta NB Omni National Bank Piedmont Bank of GA Quantum National Bank RBC Centura Bank Regions Bank SouthTrust Bank State Farm Bank, FSB SunTrust Bank The Natl Bk of Walton County The Peachtree Bank United Americas Bank Wachovia Bank Atlanta Average Abbey Williams of Rome is getting $500 for her fifth birthday. She may never actually see the money, but it will surely please her a dozen or so years from now, when she goes to college. Thanks to her grandparents, she is among the first Americans to get the benefit of a new kind of college savings plan, this one championed by private colleges. So far, only about 1,000 families have put money into accounts with the Independent 529 Plan. But the plan is 4 months old, and the marketing campaigns have hardly begun. About 230 participating colleges will be involved, as will TIAA-CREF, one of the nation’s biggest money management companies and manager of the new plan. The plan is built to attract conservative investors — investors who prefer to leave the worries to somebody else and those who just don’t want to get hurt again by the stock market. “You buy a portion of the future tuition at today’s cost,” said Thomas Carver, the grandfather who just popped an additional $500 into Abbey’s account. Carver and his wife, Betty, have also opened an account for their other grandchild, 22-monthold Ella Carver of Marietta. Carver, vice president for student affairs at Berry College in Rome, has another motivation. “I hope my granddaughters will go to a private school years from now,” he said. Here’s how the plan works: Your contribution does not buy a direct investment in stocks, bonds or whatever. Rather, you get a certificate showing how much was invested and when. Years from now, when your youngster shows up at a college business office, he or she hands over the certificate to pay for all or part of the tuition bill. There are advantages: ➤ Tuition will surely go up, but not necessarily for you. Participating colleges have agreed to charge only the tuition at the time you bought the certificate, not the date your child enrolls. You’re protected against any inflation in tuition between those dates. Let’s say you contribute RICH ADDICKS / Staff Thomas and Betty Carver have opened Independent 529 Plans to help pay for the college educations of their grandchildren, Abbey Williams of Rome and Ella Carver of Marietta. ON THE INTERNET ➤ www.independent529plan .com for details, including participating colleges and an extensive FAQ section. ➤ www.savingforcollege.com for details on state-sponsored plans, including Georgia’s. ➤ www.fool.com/csc/csc05 .htm for a comparison of various savings options. GEORGIA PARTICIPANTS ➤ Agnes Scott College ➤ Berry College ➤ Clark Atlanta University ➤ Emory University ➤ LaGrange College ➤ Mercer University ➤ Oglethorpe University ➤ Spelman College ➤ Wesleyan College $10,000 to a plan account. Tuition at the college of your choice this year is $20,000. Your certificate entitles you not to a dollar amount but to 50 percent of the tuition charge in future years. If tuition creeps up to $30,000, your certificate will pay for $15,000 of it. Tuition and fees at private four-year colleges increased by 6 percent this school year, and the growth rate has been close to that for many years. You can think of this trend, if it continues, as providing the main yield from your investment. ➤ You don’t have to worry about how the stock market performs. TIAA-CREF manages the plan accounts on behalf of the college. “It doesn’t matter to you if the investments go well or if they don’t,” said Jim Hakes, vice president of business and finance at Oglethorpe University. “You still get your percentage. The risk is taken by the institution.” ➤ You don’t have to pay income taxes on the increased value of your account. That’s the way it is with 529 plans. “If you’re fairly sure your child will attend a private college and you want to avoid the investment risk and tuition inflation, then the Independent 529 would likely be the m o s t a p p ro p r i a t e, ” s a i d Patrick Lulley, TIAA-CREF program manager for the plan. On the other hand, he added, state-sponsored 529s give more control and more choices of investments. They may be the better choice for families who foresee a public college education and who aren’t turned off by the risks of investing. Nine Georgia colleges participate in the plan. Nationally, big-name universities include Syracuse, Princeton, Vanderbilt, Notre Dame and the University of Chicago. TIAA-CREF now manages about $11 million for 1,000 account holders, Lulley said. About 1,000 people visit the plan’s Web site each day, he said, but many seem to be taking time thinking it over before investing. Grandfather Carver believes more will come, and that private colleges will be better off for it. “If all the conjectures come true about tuition increases at private colleges, it’ll do some good,” he said. “There’s got to be some way for people to afford private college tuition, and this is one way.” There are reasons to think twice before investing: ➤ Financial aid can be crimped. Payments from prepaid savings plans, including this one, are counted as “immediately expendable student resources” under federal regulations, according to the plan’s Web site. This causes a dollarfor-dollar reduction in eligibility for financial aid. That could be a major problem for families who need the extra help. ➤ You can’t use plan savings for room and board. The average for private colleges is $7,144 a year, according to the College Board’s most recent survey. ➤ There’s no guarantee your child will be admitted to a participating college — or that he or she will be interested. If things fizzle, you have options. One is to transfer the account to another family member. Another is to roll the investment over into another 529 plan. A third is to get a refund — you would preserve the tax benefits if you spend the money for college expenses. Your refund would include the amount of your investment, adjusted for the performance of the investments. ➤ Congress might change the rules of the game. President Bush once again has proposed lifetime savings accounts, which would have the same sort of tax benefits as 529 plans. Though 529s would still be available, many families would prefer the flexibility of the lifetime savings accounts. One other cloud, though it is small and on a far horizon: The law allowing tax-free withdrawals is scheduled to expire at the end of 2010. Most experts find it hard to believe that elected officials would allow that to happen. Car shopping? Compare loan rates If you’re looking for a new or used car and you’re going to use dealer-arranged financing, consumer groups have a message — watch out. You may pay more for that loan than necessary, especially if you’re black or Hispanic. The Consumer Federation of America recently released a report titled ‘‘The Hidden Markup of Auto Loans.’’ In the report, the CFA attacks a common practice in the autolending field in which dealers mark up interest rates on loans. These finance charges typically add at least $1,000 to the cost of an auto loan and are costing consumers as much as $1 billion annually, said Stephen Brobeck, executive director of the CFA, a nonprofit association of 300 consumer groups. The higher-priced loans affect about one in four consumers who get their car financing through dealers, the report concludes. In addition, the report says, MICHELLE SINGLETARY singletarym@washpost.com Credit cards are standard cards. Credit unions can do business only with members, not the general public. Copyright: bankrate.com, North Palm Beach, Fla. 561-627-7330 An expanded listing of CD yields appears each Wednesday in the Business section the subjective nature of dealer markups has led to discrimin a t i o n a ga i n s t A f r i c a n Americans and Hispanics. What’s also aggravating about this practice is that blacks and Latinos with good credit records are paying more for dealer-arranged loans, said Brenda Y. Muniz, policy analyst for banking and financial services for the National Council of La Raza. Here’s how this practice plays out: A consumer decides to let the dealership handle the financing on a car. The dealer contacts a lender. The lender, taking into account the potential buyer’s credit history and other information, such as the type of vehicle being purchased and length of the loan, approves the loan application for a certain annual percentage rate known as the ‘‘buy rate.’’ Unbeknownst to many consumers, the dealership may decide to increase the buy rate for no other reason than it can. For example, a person’s buy rate might be 5 percent, but the dealer might tell a consumer she’s been approved for a 10 percent loan. Let me break it down this way: Suppose the car you want to buy costs $20,000. Interest charges on a 48-month loan at 5 percent would come to about $2,100. But kick the rate up to 10 percent, and the interest charges jump to $4,300. Recently some auto lenders such as Ford Motor Credit Co. and General Motors Acceptance Corp. have capped the markups that dealers can charge to 3 percent. I still can’t see how that’s reasonable. The auto loans are already priced to include a profit for the lender, so why should car purchasers pay one penny more? Well, the industry argues, auto dealers should be paid for helping arrange financing for their customers. ‘‘The rate provided by finance companies to dealers is a wholesale rate,’’ the National Automobile Dealers Association said in a statement. ‘‘So, it is not accurate to say that car buyers pay extra for dealer-assisted financing since the wholesale rate is not available to the public. It’s the s a m e a s t h e d i f f e re n ce between what McDonald’s pays for a hamburger and what we pay for it. The M c D o n a l d ’s m a r k u p i s undisclosed.’’ Yeah, but we don’t have to sign a contract and take out a loan to buy a burger. There’s a lot more money at stake, and that should mean more disclosure. Michelle Singletary is a syndicated columnist. 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