Investing 101 From Alan Greenspan?

N E W  Y O R K, Aug. 8, 2001 -- Could investors learn a trick or two about where to park their money from Federal Reserve Chairman Alan Greenspan, the guru of economic gurus?

It certainly might appear that way.

Despite a sharp slowdown in the U.S. economy that began in the latter part of the year, the chief of the Federal Reserve and one of the most revered central bankers in the world may well have boosted his financial holdings in 2000, a government disclosure form revealed Tuesday.

The figures for last year show the powerful central banker had investments worth between $4.2 million and $12.1 million, $1.1 million more than the prior year's bottom end of $3.1 million and nearly twice as much as the $6.2 million top end he reported in 1999.

I'll have some of what he's having, right?

Not so fast, say the experts.

As in 1999, Greenspan played it safe last year and kept the bulk of his investments in Treasury bills — short-term securities that bear interest. And the impressive gains came during a time when the Nasdaq stock market lost more than 55 percent of its value, wiping out billions of investors' gains.

Stock Tracker

Greenspan, who can move financial markets with a carefully chosen word, avoids stock market investments lest he be seen as having a conflict of interest. By law he is banned from owning the stock of banks or thrifts, or that issued by primary dealers of U.S. government bonds. But the Fed has said he chose to go even further than the rules demanded and eschews equities completely.

But for others who have more investing options available to them, parking your money in Treasury bills or other fixed-income securities is not the best investing alternative.

"For people who need high, real returns and have a longer time horizon, the odds are extremely good that they should subject themselves to the risks of the equity markets," said Mike Fitzhugh, a financial planner Kochis Fitz in San Francisco. "You simply can't expect the kind of capital appreciation that you can get over the long term from stocks."

Your Portfolio

As almost any financial planner will note, the long-term average of stocks' performance over bonds and other fixed-income securities is far greater. Despite the stock market's abysmal performance in the past 18 months, the law of averages suggests that betting on stocks will produce greater returns.

To be sure, while Greenspan tends to steer clear of volatile stock market investments, his wife Andrea Mitchell, an NBC correspondent, made small purchases of stock in companies including cosmetics firm Estee Lauder.

Greenspan's government salary last year was $136,700, well below the wage he would command in the private sector.