What To Do With Success

When a bull market rages on Wall Street, long-term investors in mutual funds sometimes get rewarded much sooner than they ever expected.

Thanks to surging stock prices all through the mid-1990s, many people who just a few years ago began putting money aside at regular intervals in stock funds have already received a big payoff.

This sort of surprise, while cause for celebration, also may call for a careful new appraisal of what you are trying to accomplish and how you want to proceed from here.

Jay Schabacker, a veteran fund-watcher who puts out the newsletter Mutual Fund Investing, based in Potomac, Md., recently provided a real-life example of the gratifying results that a program of regular investing can produce.

In late 1992, he relates, he and his wife, Nancy, decided to pay off the balance due on their home mortgage and start investing the amount the mortgage had been consuming - $1,310 a month - in the Mutual Beacon Fund, run by celebrated manager Michael Price.

“We primed the account with an $8,000 initial investment (on Jan. 1, 1993), but just regular $1,310 monthly investments since then,” Schabacker reports.

By May 15, 1997, he says, the total amount the couple had invested in the account came to $77,430, and the value of their shares had reached $121,268.54, for a paper profit of $43,838.54.

Which brings us to one reason why you might want to tamper with a plan like theirs if it brings results faster than you expected.

Let’s suppose for a moment that your goal was to accumulate $130,000 for a child’s schooling by the year 2000. Now, surprise! You’re almost there, 2-1/2 years ahead of schedule.

The time may be ripe to get out a calculator or sit down with a financial adviser and consider moves to lower your risks and consolidate your position. In the extreme, if you can cash out, pay your taxes, and get to your goal from here using ultra-safe Treasury notes or a bank certificate of deposit, such a move may be worth thinking about.

After all, when the market is performing poorly, financial advisers routinely urge investors not to allow fear to distract them from their long-range purpose. In strong markets, it makes sense not to let greed throw you off track either.