Last week’s question and answer

I’ve called myself the “supermarket to the world,” as I process barley, canola, cocoa, corn, cottonseed, peanuts, rice, soybeans, sunflower seeds and wheat into products used in the food and feed industries. Based in Decatur, Ill., I was founded in 1905 by two linseed-crushing guys. My operations today include wheat milling, soybean processing, transportation, corn sweeteners, ethanol and peanut processing, and fermentation-based bioproducts and “nutraceuticals.” I process enough food products to feed more than 300 million people every day. I feed the world. My annual sales top $36 billion. Who am I?

(Answer: Archer Daniels Midland)

Year-end distributions

The season of giving is not over yet, as funds across the land are getting in on the gifting game by doling out end-of-the-year distribution payouts to shareholders.

Distributions are paid out as dividends or capital gains, with dividends and long-term (one year or more) gains enjoying a 15-percent tax rate and short-term gains typically carrying a higher tax load. Taxes on any kind of payouts apply to all shareholders as of the “date of record,” a day specified by the fund company that falls shortly before the distribution payout date.

As long as you own a fund on the date of record, fund companies don’t care if you’ve held the fund for five days or 5,000 — you’re getting the payout. As such, you’ll want to hold off buying (or adding money to) that fund that makes your heart go pitter-patter until after the date of record. Otherwise, you’ll pay for gains you didn’t receive when it’s time to cut that April check to Uncle Sam.

If you own mutual funds solely through your 401(k), IRA or other tax-deferred account, distributions don’t affect your tax bill until withdrawal time. So go on, finish your nap.

Curious about the payouts from other funds in your portfolio or on your wish list? Check for estimated distribution amounts and dates on your fund companies’ Web sites. And remember, no early shopping.

Bad advice

In 1995, I opened an account at Merrill Lynch and wanted to buy shares of Starbucks. I liked its product, so did just about everybody else, and the stores were always active. They were definitively expanding. But I let the broker talk me out of it when she said that I would not be getting a lot of shares for the amount I was investing. She had me invest in a Mexican bank stock and some drug company. I managed to get out a while later, but had lost most of my money. Now I am in law school, married and ready to get back in the market. I seriously doubt I will ever seek the advice of a broker again. — Charles Cantrell, San Antonio

The Fool Responds: While there are many smart brokers who do well by their clients, others will shrink your wallet as they fatten their own. That’s why we prefer discount brokers who don’t tell you what to buy. Learn more at www.broker.Fool.com or the “Benchmarks” page at www.gomez .com.

The OTC

What are “OTC” stocks? — H.P., Waynesville, Mo.

OTC officially stands for “over the counter,” but today “over the computer” is more apt. Long ago, to buy or sell a stock that didn’t trade on an exchange, you would call your broker. He would then call another broker and make the trade over the phone — not a terribly efficient system. Then, in 1971, the Nasdaq stock market was established, offering an automated trading system. Suddenly, it was much easier to get the best price on your transaction, and trading activity could be monitored, too.

Stocks that are listed on exchanges (such as the New York Stock Exchange) are generally traded face-to-face at one location, in “pits.” All others are OTC stocks, traded electronically via a network of dealers across the country.

The Nasdaq stock market is the main OTC system in the United States, and it lists thousands of companies — from young, relatively unknown firms to many enterprises you’re probably familiar with, such as Apple, Microsoft, Intel, Starbucks and eBay. Thousands of more obscure OTC companies that don’t meet Nasdaq’s requirements trade separately, often with their prices listed only once daily, on “pink sheets.” Often, little information is available about these companies, and many are volatile, speculative “penny stocks,” shunned by most Fools.

Do you Fools have any step-by-step online guide to investing? — C.N., Tallahassee, Fla.

We sure do. Click over to www.fool.com /school and you can read our “13 Steps to Investing.” The steps include settling your finances before investing, setting proper expectations, using index funds, learning about the power of reinvested dividends, opening a brokerage account, planning for retirement, studying companies and much more.

A cashless society?

Many fast-food locations have begun accepting credit cards for payment.

On Sundays, most churches across America collect offerings in the form of cash and checks. But now some churches are accepting charge cards, as well. Heck, you can even pay your income tax and gas bills with plastic.

While more and more merchants are accepting plastic, more and more Americans are using cards for more and more purchases. A recent Wall Street Journal article noted: “For the first time, Americans used cards — credit, debit and others — to buy retail goods and services more often than they used cash or check in 2003.”

The article also cited some telling statistics:

• The percentage of American households with payment cards: 73 percent today vs. 16 percent in 1970.
• Average cards held per household: 0.6 in 1971, and a whopping 7.8 in 2003.
• Number of merchants that accept cards: 820,000 in 1971, and 5.3 million today.
• The number of card solicitations that will arrive in our collective mailboxes this year: nearly 5 billion. There are only some 300 million Americans, and roughly 100 million households — so that’s 17 offers per person, and 50 per household. Jeepers.

Is this trend a good thing? Well, it sure seems so for card-issuing companies. It also offers consumers some benefits, such as convenience. But there’s a catch: When we pay with plastic, we tend to spend more, perhaps because the cost doesn’t seem as real.

Another way to think about it is this: If you’re charging all kinds of little (and big) discretionary purchases on plastic and are accumulating credit-card debt, you may be paying interest on that cheeseburger value meal for more than a decade. It can end up costing you several times what you paid for it — hardly a value now, eh?

Be vigilant with credit. It can be a wonderful and handy tool, but its dark side is dark indeed — and dangerous. Learn a lot of important things about how credit works at www.fool .com/ccc and www.federal

reserve.gov/pubs/shop.