Investment Companies Tout Conservative Partnerships / Advantages over Liquidity Cited in Wake of Stock Market Crash

Article excerpt

This is a rather curious period in which brokerage firms, banks and mutual fund companies are unleashing heart-to-heart advertising campaigns designed to let you know they're squarely in your corner.

Which is nice, because we all prefer to feel wanted rather than ignored, especially in the wake of a traumatic stock market collapse.

However, since those coordinated warm feelings do revolve primarily around your hard-earned money, this is a time when it's really best to make your own decisions and be in your own corner.

The choice between liquid and illiquid investments is one such decision. Despite what advertisements may say, there's no one right answer as to whether it's better to have money in easily-reachable financial assets such as mutual funds or in hard-to-get-at choices such as limited partnerships.

Diversifying between both is probably your best bet, though even that depends on your age and circumstances. During the first half of the 1980s, the more liquid the investment, the better the results. Yet recent volatility in funds, stocks and bonds has made a number of investors willing to tie up money for the long haul in hopes of finding something to depend on.

``In the wake of October 19th, I think investors must get through a period of paralysis,'' said James Carthaus, director of financial services for Shearson Lehman Brothers, following a 10-city tour to pitch partnership products to the firm's sales staff. ``After that, I think a lot of them will realize relatively conservative partnerships emphasizing choices such as real estate offer some things the stock market does not.''

As with mutual funds, limited partnerships are not all alike. Each has its own level of risk ranging from low to high, as stated in its prospectus. While Boston-based Krupp Corp. offers a partnership that invests in Ginnie Maes insured by the federal government, many others have no guarantees.

Most partnerships tie up a $5,000 initial investment for six to 10 years, with the goal of a 7 to 10-percent annual return and also return of the principal. When and how you receive income and principal depends on how the partnership is constructed. …