======================== THE MOTLEY FOOL ========================
                        INVESTING  BASICS
                      Tuesday, October 23, 2001
benjamin.rogers@enron.com
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IN THIS ISSUE
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- Q&A: Should I Invest in High-Yield REITS?

- Q&A: How Much Do I Need to Invest?

- LESSON: Warren Buffett on Investing

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YOUR QUESTIONS ANSWERED

Q. WHY DO SOME REAL ESTATE INVESTMENT TRUSTS (REITS) HAVE
TERRIFIC DIVIDEND YIELDS WHILE OTHERS DON'T? IS THERE ANY REASON
NOT TO INVEST IN HIGH-YIELD REITS?

A. If a yield looks too good to be true, it probably is.
Remember that it's the market that sets the price of the stock.
And as a stock's price drops, its yield rises.

For perspective, consider that a 30-year U.S. Treasury is priced
to yield around 6 percent, because investors are pretty sure the
dividend will be paid. But Russian government bond yields can hover
around 30 percent -- because investors are not so sure.

The same goes with REITs. As an example, consider Kranzco, the
highest yielding shopping center REIT with a yield of around 15
percent at the time of this writing (in 2000). Because of weak
earnings, it has been forced to cut its dividend. This
development caused many investors to sell, sending the stock
price south and the yield up. Management's dividend cut may be
enough, but investors are understandably nervous about what the
future holds.

If you invest in a REIT yielding 10 percent, things may well
turn out hunky-dory. But if you go for one kicking out 18
percent to 30 percent, you're buying into income streams that
other folks find pretty doubtful. You'll want to do enough
research to be pretty sure you're right.


Q. WHAT IS THE LEAST AMOUNT OF MONEY THAT YOU CAN INVEST? WHAT
IF YOU DON'T HAVE ENOUGH MONEY TO BUY 100 SHARES?

A. It's tragic that many people put off investing for years,
thinking they're not rich enough to benefit from the stock
market. You definitely don't need to have $1,000 or more before
you start investing. You don't have to buy 100 shares at a time.
You can buy 17 shares or nine shares -- or even fractions of
shares, using some services. For instance, at buyandhold.com,
you can invest as little as $20 at a time and buy fractional
shares of stock, paying $2.99 per trade.
http://www.lnksrv.com/m.asp?i=524551

If you're really interested in learning more about the basics,
check out our Beginning Investing Online Seminar that also
includes a copy of our Money Guide.
http://www.lnksrv.com/m.asp?i=524552


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THIS WEEK'S LESSON

WARREN BUFFETT ON INVESTING
A great way to learn about investing is to glean insights from
experienced, successful investors. One of the savviest is Warren
Buffett. Here are some comments he made at his Berkshire Hathaway
shareholder meeting in 2000:

"The first investment primer was written by Aesop in 600 B.C. He
said, 'A bird in the hand is worth two in the bush.' Aesop forgot to
include when you get the two in the bush and what interest rates are.
Investing is simply figuring out your cash outlay (the bird in
the hand) and comparing it to how many birds are in the bush and
when you get them."

"It's no religious thing why we don't invest in technology. It's
just that we've never found a company where we think we know what
the bush will look like in 10 years and how many birds will be in it.
We understand technology and its impact on society. It's the
predictability of the economics of the situation 10 years out
that we don't understand. ... The only way we know how to make
money is to buy businesses we understand."

"I own 100 shares of companies such as Microsoft and Intel, so I
get the annual reports. I don't think it's a dumb thing if you want
to learn about businesses to invest tiny amounts in various companies
-- especially for young people -- to get exposed to various managements,
to go to shareholder meetings, get reports, etc."

"It pays to have the right role models/heroes. ... You'll want
to be a little or a lot more. I tell students to pick out the qualities
they admire in people they admire and ask why they can't develop
those qualities themselves. It's very simple. The person you'd
really like to admire is yourself."

Berkshire's Vice Chairman Charlie Munger added, "You can't avoid
making wrong decisions in life, but if you recognize them and do something
about them, you can wring some lemonade out of them. We've
scrambled our way out of many mistakes."

For more Buffett wisdom, head to berkshirehathaway.com, where
there are several decades' worth of his extremely educational
letters to shareholders. Or visit our Berkshire Hathaway
discussion board online.
http://www.lnksrv.com/m.asp?i=524553


=================================================================

SPONSORED BY: Kaplan
Become a Financial Planner! Kaplan College's online Cert.
in Financial Planning program prepares you for success in
the #1 ranked profession. Invest in your future career today!
http://www.lnksrv.com/m.asp?i=524554

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