High income, low risk? :-)

From: "Melinda Johannes" <mbjohannes@hotmail.com>
Subject: High income, low risk? :-)
Date: Thu, 06 Aug 1998 14:16:08 PDT

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Hi all, I hope you can help me.

I'm having a difficult time determining how to allocate some
assets for the short term while still maintaining liquidity
and achieving a better return than that offered by CDs or
money market accounts.  Here are the specifics:

I have $140,000 in a money market fund.  There are other assets,
but those are tied up in retirement accounts and don't figure in
this scenario.  This $140,000 is also above and beyond my 6 month
"emergency fund."

I'll be starting up a franchise within the next 2 to 8 months.
The time frame is indeterminate because we are still looking
for a suitable site.  We may find one in 3 weeks, we may find
one in 6 months.  It'll be a retail kid's clothing operation.

Up until the business opens, I'll need to make this $140,000
work as hard as possible, but will still need to keep most of
it as liquid as possible, too.

I plan to use up to $100,000 for startup costs (inventory,
training, lease, insurance, legal fees, building out the store,
etc.) and the remaining $40,000 for working capital.

What I'm planning to do is maintain $70,000 in the money market
account and split the remaining $70,000 between the following
funds, all chosen because they're available as Fidelity
"no transaction fee" funds, and have good Morningstar ratings
and a good long term (5 years+) track record:

10% to Baron Asset fund (small cap)
15% to Hotchkiss and Wiley Equity Income fund
10% to Invesco Strategic Finance fund (sector)
40% to Loomis and Sayles Investment grade bond fund
25% to Dreyfus High Yield bond fund

I'll be routing all the income and dividends from these funds
into the money market account to bolster my working capital
and protect it (the income, at least) from share price declines.

As the actual startup date approaches, I'm planning on kind of
"reverse dollar cost averaging" back out of the funds as necessary,
until I am in a cash position (well, maybe 80-90% cash,) on the
date I open.

Given my short time horizon and need to preserve capital, am
I too heavily vested in equities and/or high yield bonds?

Can anyone suggest an alternate allocation?  I realize that
safety lies in money markets and CDs, but as I said, I'm willing
to assume a little risk to achieve a better short term return.

Am I assuming too much risk that I'll buy in at a market high
if I put the $70,000 into the funds all at the same tims?  I
don't have time to DCA in and DCA back out.

Should I just bag this whole idea and leave it all in money
market and laddered short term CDs and forget about taking any
risk at all?

Thanks in advance for any and all responses.

+=+=+=+=+=+=+=+=+=+=+=+=+=+
: Melinda Johannes        :
: mbjohannes@hotmail.com  :
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