TAKING STOCK: Never trust an advisor of the cloth

Dear Mr. Berko: We have two children, ages 7 and 11. A financial advisor who is also a deacon in our church wants us to open a college 529 plan in the Putnam Voyager Fund. We have money from an $88,000 inheritance plus 655 shares of Veolia Environmental stock from my aunt, who died last year. We've been advised to invest $25,000 for our 7-year-old son and $38,000 for our 11-year-old daughter. And because Putnam Voyager should be able to grow by 10 percent annually, our son's $25,000 should be worth $75,000 by the time he turns 18, and our daughter's $38,000 should be worth $75,000 when she's ready for college. That sounds straightforward to us. Our advisor wants us to sell the 655 shares of Veolia stock and put that money in Putnam Voyager. A friend of ours in the insurance business (casualty) told us to write for your opinion because he thinks our advisor is "fishy." So what do you think of our Putnam Voyager 529 plan, and what do you think of Veolia? TP, Port Charlotte, Fla. Dear TP: Among the dumbest things you can do is purchase Putnam Voyager in a 529 plan for your 7- and 11-year-old kids. In fact, one of the dumbest things any parent can do is invest in a 529 College Plan. Every state in the lower 48 plus Hawaii, Alaska, Puerto Rico and the Virgin Islands offers a 529 College Plan. And I've not heard of a single parent in any of those states or territories who has earned a 10 percent average annual return in the past 25 years, the past 20 years or the past 10 years. I don't know of a single solitary soul who has earned 7 percent return or a 5 percent return or a 3 percent return in a 529 plan in the past decade. And I haven't heard of a single soul in the past 10 years who has taken out more out of their 529 Plan than they put in. Those 529s have been a boon for the brokerage industry and a heartbreaking bust for parents with kids. The deacon gave you bad advice and he should be selling glow-in-the-dark bibles so that he can't hurt good folks like you. Mixing religion and investments violates the 12th Commandment. Putnam has been in business since the Lord's dog was a puppy. It has had some good years and some bad years; during the last decade, the 10-year average annual total return for Putnam Voyager (PVOYX-$18.45) has been a niggling 1.21 percent. While that's better than most mutual funds, many of which have had have negative 10-year returns, I'm convinced PVOYX will not provide you with a 10 percent average annual total return in the coming 7 or 11 years. In fact, you'd be hard put to find a fund that can. I suspect your deacon, who is prospecting in God's sanctuary, may be salivating over the 5.75 percent commission he'll euchre from you via a $63,000 investment. Meanwhile, Florida has a prepaid college plan that's worth considering - and it's risk-free. Veolia (VE-$15) is a worldwide, 227,000-employee, $49 billion-revenue company involved in Vivendi (water), Onyx (waste management), Dalkia (energy) and Connex (transportation). VE derives 20 percent of its revenues from the United States, 42 percent from France, 31 percent from Europe (excluding France) and 7 percent from other countries. VE has a good balance sheet (book value: $19.56), $9 billion in cash and only 505 million shares outstanding. Though homeported in France, VE's shares trade on the Big Board, and its $1.47 dividend yields over 10 percent. VE, which traded in the mid-30s during the last dozen months, has suffered the double whammy of a crashing European economy and lousy (French) management. Earnings, which were disappointing last year, should improve markedly this year and next, however. Do not - I repeat, do not - sell VE. Rather, this might be a good opportunity to round out your 655 shares to 1,000 shares. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2011 Creators Syndicate Inc. Published: Wed, Nov 2, 2011