Senior Does Fine Without Mutual Funds

When fee-only financial planner Brent W. Kessel recommended adding six mutual funds to her portfolio, Mary Kaptur wasn’t convinced that it would be the right thing for her.

After all, Kaptur, who came to Los Angeles in 1937 with just $100 and whose investments are now worth nearly $1 million, accumulated her wealth without investing in a single mutual fund.

“I have never felt comfortable with mutuals,” said Kaptur, 84, explaining one of her reasons for not purchasing the stock and bond funds the Santa Monica-based planner had suggested. “Maybe if I had started using them years ago I would, but I just don’t.”

Last spring, when she sought Money Make-Over’s advice on her investments, Kaptur had about $105,000 in long-term municipal bonds, $80,000 in individual stocks and $45,000 in Fannie Mae mortgage bonds. She also had $38,000 in bonds and cash in a traditional individual retirement account and about $25,000 in a savings account.

She had real estate holdings too, with about $440,000 in equity in a seven-unit Westside apartment building valued at $550,000 and $100,000 in equity in her home, an apartment in a Westwood cooperative.

She had only recently and reluctantly, on the advice of her broker, invested in two growth stock funds: Dean Witter MSDW Competitive Edge BIT and Davis New York Venture End Balance. She is already considering selling the funds, in which she invested $5,000 apiece, saying she’s not pleased with their performance.

Kaptur, who is retired from a career in bookkeeping and office management, said she understands the arguments for investing in mutual funds--they take less time for investors to follow and offer a simple way to invest in many securities--but she just prefers to invest as she always has, in individual stocks and bonds and real estate.

“I am retired. I have the time to read and do research,” Kaptur explained. Other than the mutual funds and some of her stocks, which are down slightly, she said, her portfolio is continuing to perform satisfactorily.

Kessel had offered a number of other suggestions as well, among them that she refinance her income property to cut her mortgage interest costs and get earthquake insurance on it. Kessel also urged Kaptur to follow through on her intention to minimize estate taxes for her heirs by changing her life insurance coverage.

Kaptur took in the advice, she said, considered it, talked it over with her own advisors, then decided to follow some of it.

She did not want to refinance her income property, she said, unless she could get a fixed-rate loan, and she couldn’t find a satisfactory one. Kaptur said she recognized the soundness of Kessel’s argument that in forgoing earthquake insurance, she could be putting much or even all of a large investment at risk, but she’s willing to chance it.

She did, however, take the estate-planning advice. She consulted with her attorney and is now satisfied that she has set up trust and life insurance arrangements that will minimize her heirs’ estate-tax liability.

In the meantime, she continues to enjoy an active social life that takes in everything from lawn bowling to foreign travel. She recently returned from a trip to India, where she visited the Taj Mahal.

“I had always wanted to go there,” Kaptur said. “I am not getting any younger.”