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Lipper
Muriel Siebert & Co.


Invest for growth rather than income

- Alan Lavine and Gail Liberman



Are you receiving periodic interest and dividend payments from your investments?

Big mistake, says Ron Muhlenkamp, author of Harvesting Profits on Wall Street (Muhlenkamp & Company Inc.). Reason: Inflation and income taxes can take too much of a bite.

Here's the average annual return between year-end 1925 and 2004, after taxes and inflation. Data, from Ibbotson Associates, Chicago, assume no capital gains taxes for municipal bonds and reinvestment of income.

  • Stocks: 4.8 percent.

  • Bonds: .6 percent.

  • U.S. Treasury bills: -.9 percent.

Better strategy: Invest in growth-oriented stocks or stock mutual funds, Muhlenkamp says. If you need money to live on, take regular withdrawals as needed.

This way, you'll only get hit with a maximum 15 percent capital gains tax.

Continue investing on an after-tax basis to grow more assets.

Periodically review and adjust your investments to reflect changes in the markets, tax laws and personal goals. Move extra assets to heirs or charities.

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Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Rags to Retirement (Alpha Books)." You can e-mail them at MWliblav@aol.com.


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