Q. In 1995 I switched $400,000 to a new broker and by August 2000 it was $850,000. But over the next 7 months I've dropped $50,000 each month for a total of $350,000. I'm just $52,000 from reaching my original investment--- or 0 percent return for 6 years.

Should I be concerned about possible bankruptcy in a few more months?

My broker advises me to hang on at all costs! The real concern for me is that my wife is 63, of unstable health, and drawing minimal Social Security. In July I will be 59  ½. I am unemployed as I care for an elderly mom.

Originally, I was invested in American Capital with its dollar-cost-averaging system but a broker who fled the state forced me to switch advisors and dump. Ouch!

What would you advise? Sell? Hold? Switch? This double whammy leaves me doubting my steps.

---H.D., Dallas, TX


A. There are limits to what can be read from a monthly brokerage account statement but yours caused me concern on several fronts:

•           The statement shows a total of 15 different mutual funds. Examined                more closely, most are high-risk growth funds with substantial                commitments to technology. This is a real 'swing for the fences'                portfolio, if it can be dignified with the word portfolio.

•           The bulk of the portfolio is invested in 6 funds that are "A" share                funds which means that you pay an up front load to get into the                fund. The same statement, however, shows a monthly advisory fee.                This makes for a very heavy expense load on your portfolio. If the                advisor has been changing A share funds regularly your portfolio is                                a very good income vehicle--- for him.

•           Unless you have substantial resources in addition to this fund, it                is inappropriate for a person in your age and situation. Your cash                position is only 10 percent and there are no other fixed income                holdings. Value oriented funds account for less than 2 percent of the                portfolio. If you are about to start making regular withdrawals from                this portfolio you have a recipe for disaster.

Here's what to do. Fire the advisor. Liquidate the funds. Then hold cash. You can do this without moving your account from the brokerage house where it is currently located.

From there, you have two choices. You can interview a number of advisors and start over. Or you can invest for yourself. You could, for instance, do "one stop shopping," and put your money in one of the balanced funds mentioned in my recent column on same. This will reduce your risk from its current level.

You advisor may continue to argue that you hold on "at all costs" but he is getting paid monthly and you are losing monthly. The only way he can advise a change is to admit that he (1) made a major mistake and (2) wasn't flexible as the scope of the technology crash became apparent. Don't expect him to make such an admission.


Q. I am 67 years of age, have no debt, and have rental and other income in excess of $75,000 a year. My stock portfolio is almost entirely preferred stock that pays from 6 to 8.5 percent. Should I diversify or continue?

---E.M., by e-mail


A. With dividend income becoming an absolute rarity---only 453 of the 7,181 common stocks in the Morningstar database have yields greater than 5 percent--- and fixed income yields marching toward 3 percent your preferred stock portfolio is likely to produce capital gains as well as dividend income in coming months. That said it's always dangerous to have 100 percent of your money in any category of investment.

I suggest that you make a leisurely plan to diversify into other asset categories.