Stocks vs. Bonds

Q: Should I invest in stocks or savings bonds for my kids? – W.M., Baton Rouge, La.

A: It depends on your plans, because the stock market is best for long-term investments. If the money will be spent on college, then determine how many years you have until they’re 18. If it’s for their future use as adults, it might grow for a few decades.

Putting the money in “safer,” less volatile investments such as savings bonds or CDs will give you a modest return and minimize losses. But over most long periods of time, stocks will outperform bonds and CDs. If you can leave the money to grow for five, or better still, 10 or more years, stocks are more compelling.

An index fund is a great way to start with stocks. You might also invest at least a little money in the stock of a few companies that your children know, such as PepsiCo or Microsoft. Then you can follow the fortunes of the companies and your investments together as they learn about the stock market.

Learn more about savings bonds at www.savingsbonds.com and other bonds at www.bondsonline.com. Learn about index funds at www.indexfunds.com and at www.fool.com/funds. At www.fool.com/shop/newsletters we offer newsletters to help you find superior investments – try them for free.

Q: What does it mean when I see that “Today’s Volume” for a stock is 11,300,000? – K.B., San Antonio

A: Imagine Chihuahua Channelers (ticker: YIPYIP), which helps people communicate with long-lost pets. If its current volume is 11,300,000, that just means that so far today, 11.3 million shares of the stock have changed hands. Volume can vary widely – Microsoft averages nearly 70 million shares per day, vs. 3 million for 3M.

Bank Foolishly

All banks are not alike. You may have chosen yours for a good reason, but here are some other considerations. They may save you some money.

â If you chose a bank due to its location, know that these days, with newfangled inventions like the telephone, direct deposit, the U.S. mail system and the Internet, you don’t need to be particularly close to a bricks-and-mortar branch of any bank.

â A good way to figure out exactly which of a bank’s services you most need to pay attention to is to make a list. Jot down the following items on a sheet of lined paper and make three columns, where you enter how much you spent for each category in each of the past three months: ATM surcharges, “foreign” ATM fees, other ATM fees, overdrafts, monthly maintenance fees, check printing, deposit/other slips, call center charges, debit card fees, low-balance penalty, per-check charges, return check/NSF fees, money order fees, traveler’s checks and other bank fees. This will help you quickly see where your money is going and what features you should examine when evaluating a bank.

â If you’re parking any money in CDs, shop for the best rates. Check sites such as www.bankrate.com. You might earn 1 percent or 2 percent more at a small bank a few states away.

â You can often get a higher interest rate on your checking account at a small regional bank than at a big national one. Better still, some brokerages are now offering banking services such as check writing. Learn more about brokerages and how to pick a good one at www.broker.fool.com.

â Use direct deposit. It saves time, and some banks will give you free checking if you use it.

â Don’t order checks from your bank, which might charge as much as $25 for 200 checks. You can get the same thing for a fraction of the price through services such as www.checksinthemail.com and checkreorderexpress.com.

For more information and tips, pop over to www.fdic.gov/bank/individual/online/safe.html and www.aba.com/Consumer+Connection.

The Jury Is Out

Back in 2004, after hearing Loudeye CEO Mike Brochu speak with such positiveness and common sense about the future of digital communication on a talk show, I jumped on the bandwagon. I was feeling cocky and considered it total speculation, so I invested just $1,500, less than 1 percent of my portfolio. Over the next year, it fell some 40 percent. It’ll be interesting in the coming years to learn if it truly was a dumb move, or if I stumbled on the next Microsoft (ha ha). – K.G.K., Seattle

The Fool Responds: Yikes. That’s a lot of money to speculate with. The digital media distribution and promotion specialist may end up faring well in the long run, but it’s not a slam-dunk now, with net losses instead of gains and a CFO/COO who departed after just eight months. With its stock trading for less than $1 per share, this is a “penny stock” firm that merits close inspection before any investment. Better still, wait for it to turn profitable.

Foolish trivia

Founded in 1886 as the “Workshop for Precision Mechanics and Electrical Engineering,” today I’m a leading global supplier of consumer, automotive, building and industrial technology, raking in $40 billion euros per year. I’m based in Germany, but 72 percent of my sales are generated outside it. I employ some 240,000 people worldwide and sport about 270 subsidiary companies. With some 2,800 inventions, I’m the second-largest patent applicant in Germany. Since 1964, my majority shareholder has been a charitable nonprofit foundation named for my founder. I make gas water heaters, dishwashers, washing machines, Blaupunkt car stereos and much more. Who am I?

Last Week’s Trivia Answer: Based in Nashville, Tenn., I was founded in 1968. I am the nation’s leading provider of health-care services, owning and operating 190 hospitals and approximately 90 freestanding surgery centers in 23 states, England and Switzerland. Over the years, I built, bought and/or managed many hospitals, operating some 463 by 1987. I spun off HealthTrust that year, and merged with Columbia in 1994. The son of one of my founders is currently the Senate majority leader in Washington. I rake in more than $20 billion annually, and my market value is north of $23 billion. Who am I? (Answer: HCA)

Amgen Keeps Profits

Following positive phase-3 clinical trials for late-stage colorectal cancer therapies, biotech giant Amgen (Nasdaq: AMGN) apparently thought better of having to shell out 50 percent of the profits to its partner, Abgenix. Instead, it decided to buy Abgenix, for $2.2 billion.

The companies had been collaborating on the colorectal cancer drug panitumumab and the bone cancer and osteoporosis drug denosumab. When marketed, panitumumab will compete against Erbitux, developed by ImClone Systems and marketed by Bristol-Myers Squibb. Erbitux is also used to treat colorectal cancer in patients who have not responded to chemotherapy treatment.

Amgen expects the deal to reduce earnings by 5 cents to 10 cents per share over the next year or so, but it also sees panitumumab generating annual sales of $2 billion once it’s launched. If that’s the case, then Amgen is getting Abgenix for the price of panitumumab alone and acquires the rest of the company essentially for free. That’s nice, since the bone-loss drug denosumab has blockbuster potential in the huge osteoporosis market.

The deal could mark the beginning of a new phase of drug development. Rather than paying out royalties to partners, biotech firms would instead swallow them and keep all of the revenues in-house. The research-and-development-stage companies best positioned for such acquisitions would be those with deep pipelines of promising new drugs.