Q. At 52 years old (married with 1 college age child) I have $600,000 in a SEP account and $1,100,000 in a CMA at Merrill Lynch--- but I am groping in the dark for investment strategies. ML currently manages my SEP for 1 percent a year. It has 70 percent in stocks and the rest in strips and corporate bonds. As you can imagine, it has not fared too well lately. My CMA is not managed and is 40 percent cash, 20 percent stocks with the rest is tax-free municipals.

My broker is working hard to get me into variable annuities and a "premiere managed account." I am a self-employed contractor making $100,000 to $200,000 a year and put the maximum into the SEP yearly. I enjoy working but look forward to quitting in the next few years. What do you suggest?

---T.S., by e-mail from Granbury, TX

  

A. Having losses in your account doesn't mean that you have been ill served. The important thing to measure is how your managed SEP account has done relative to other accounts of a similar nature. I'd call this a balanced account, with a bit more equities than most. Vanguard Balanced Index, a low cost, no-load fund that invests 60/40 in equities and bonds, outperformed 73 percent of its competitors over the five-year period ending June 3. Even so, it has lost 3.39 percent year-to-date, lost 3.02 percent in 2001, and lost 2.04 percent in 2000. In 1999 it made 13.61 percent and in 1998 it made 17.85 percent.

A managed account should provide regular measures of performance based on after-fees measurement of account growth, including appropriate adjustments for new deposits. I suggest that you go through previous statements and try to benchmark how this account has performed. You should also ask your registered representative to do the same thing. Only when this is done will you have any basis for thinking you have done poorly, or well.

With $1.1 million in taxable assets you have no need for the high fees of most variable annuities. You should be able to get a tax-managed account with a good advisory firm for an annual fee of 1 percent. As a relative value measure: you can get Vanguard Tax Managed Balanced fund, which runs at 99 percent tax efficiency, with an annual expense of only 0.20 percent. The fund invests about half its assets in tax-free bonds and the remainder in equities. Over the last 5 years it has done better than 85 percent of its less tax conscious peers.

Another offering, available from your broker, is American Funds Balanced Fund. This fund has been 97.5 percent tax efficient over the last 15 years and has provided a better performance than 90 percent of its competitive peers over every time period in the last 15 years. When you make an investment of $1 million or more in this fund the front-end commission is waived. Your broker would be paid but 100 percent of your money would be invested.

You may recall that I have frequently praised the American Funds group in my columns because they offer a way for a broker to get paid for good advice while delivering high quality management at low cost. This fund, for instance, has an annual expense ratio of 0.69 percent.  

  

Q. My 7-year old has a modest amount of earnings as a model/actress. She's accumulated about $4,000 in a Roth IRA (About half is in an S&P 500 Index fund, half in the Schwab 1000 fund. She also has a continually dwindling sum in a telecommunications sector fund.). The remaining $10,000 is in a passbook savings account. She's had short term CDs that have matured. I'm more comfortable making mistakes with my money than with hers, but having it in the bank for the last 24 months now seems brilliant. The money is intended for her college education in 11 years. Any suggestions?

---P.C., by e-mail from Denton, TX

  

  A. Sometimes indecision is brilliant. If you think there is a good chance she will go to college in Texas, how about the Texas Tomorrow Fund? While the new 529 accounts offer more flexibility (enough to bewilder you into still more indecision), the older Texas Tomorrow Fund is a simple way to pay for tomorrows' tuition today. According to their website, www.texastomorrowfund.com, an investment of $3,867 today would fund one year of tuition in 11 years. Her $10,000 would prepay two years of tuition with a running start left over for a third year.