What the experts say

Buffett: Why I like stocks

I believe stocks are “the runaway winner” over bonds and gold, and “will be by far the safest” investment in the long run, said Warren Buffett in Fortune. Bonds tied to currencies, in fact, are such dangerous assets that they “should come with a warning label.” They’re tied to interest rates that are so low right now that they can’t even cover losses from inflation and taxes. Investors should also avoid gold, which will “never produce anything.” It’s far better to invest in companies or farmland, both of which actually create new wealth. All the world’s gold, melded together, would form a 68-square-foot cube, worth about $9.6 trillion. Would you rather have that cube, or its dollar equivalent: all the cropland in the U.S., plus 16 ExxonMobils (the most profitable company in the world), with $1 trillion or so left over? You can probably guess my preference.

Using leftover school savings

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If you’re lucky enough to have money left over in a tax-free 529 college savings account—because your child got a scholarship or went to an inexpensive school—don’t cash out, said Georgette Jasen in The Wall Street Journal. If you withdraw the unused funds, you’ll have to pay taxes on the earnings, plus a 10 percent penalty. You’re much better off transferring the balance to a family member—another child or a niece, perhaps—or saving it for future graduate-school expenses. Money in a 529 plan can also be used to pay for some vocational programs, as well as back-to-college classes for parents. Whatever you choose, there’s no rush. Most plans allow the funds to grow tax-free indefinitely.

The other S&P 500

What gets better returns than the S&P 500? asked Jack Hough in SmartMoney.com. The S&P 500 Equal Weight index. Both track the same companies, but in different proportions. The traditional S&P 500 weights companies by the size of their overall stock value; its 10 largest companies make up nearly 20 percent of the index. The Equal Weight index, as its name suggests, accords each of the 500 stocks an equal weight, giving you more exposure to smaller stocks. From 2006 through 2011, it returned an average of 1.75 percent a year, compared with an average loss of 0.25 percent for the regular 500. But it’s also more volatile, because “small companies are generally considered riskier than large ones.”