Thousands of readers called USA TODAY's Investment Planning Hot Line on Thursday. Calls were answered by members of the Institute of Certified Financial Planners at their annual convention in San Diego. The ICFP is celebrating its 25th anniversary. Here are some of the most common questions, prepared by personal finance editor Ray Goldbacher and personal finance reporter Sandra Block.

Internet stocks?

Q: I'm a long-term, experienced investor. I want to put 5% of my portfolio in Internet stocks, such as America Online, because I think they're good long-term investments. Is that a good idea?

-- Ken Partacz,

Atlanta

A: The Internet is the future, says Nancy Langdon Jones, a planner in Upland, Calif. But investors in Internet stocks should be willing to hold the stocks for a long time. Internet stocks are selling for very high prices, relative to their earnings. America Online, for example, now sells at 409 times its past 12 months earnings per share. And many Internet stocks have no earnings at all.

The Internet is undergoing rapid changes, and not all of these hot new companies will survive. So do your homework and research Internet stocks before you buy. Don't invest money you can't afford to lose.

IRA for wife?

Q: Can I contribute to a Roth individual retirement account (IRA) for my wife, who has no earned income?

-- Gerald Simpson,

Ashland, Ohio

A: If you meet the income limits for Roth IRAs, you can contribute up to $2,000 for a nonworking spouse. Joint filers can contribute the full $2,000 to a Roth IRA if their adjusted gross income (AGI) is below $150,000. In case you're wondering, a single filer needs AGI below $95,000 to contribute the full $2,000 to a Roth.

Just starting

Q: I'm a 37-year-old homemaker with four children. I have some money in the bank and want to invest, but have no idea where to start.

-- Mary Grill,

Bridgewater, N.J.

A: Grant Rawdin, a financial planner from Philadelphia, suggests a three-part plan:

• Set up an emergency fund that will cover three months of your household expenses.
• Open an Education IRA for each of your children. The account has nothing to do with retirement. It's for your child's education after high school. You can invest up to $500 per child per year in an Education IRA. The money will grow tax-free until they use it for post-secondary education -- and then the money is tax-free at withdrawal.
• Open a Roth IRA. Because you're new to investing and don't have time to research stocks and funds, use a stock index fund in your Roth. Index funds try to mimic the movements of a stock index, such as the S&P 500 index. They usually charge low fees.

T. Rowe Price (1-800-638-5660) will let you start an account in its Equity Index Fund for just $50.

Burnt by broker?

Q: Last week I asked my broker to invest $2,000 in Broadcast.com's initial public offering (IPO). On Friday, I saw it skyrocket from its IPO price of $18 to $65 a share. I spent the weekend shopping for a new boat. But on Monday, my broker called and said he couldn't fill my order. What should I do?

-- Ed Turgeon,

Shreveport, La.

A: Your broker should have told you that very few small investors can invest in hot IPOs, such as Broadcast.com. Securities firms typically reserve those offerings for their longtime customers and large, institutional investors. Most other investors have to wait until the stock is traded in the secondary market, which means they pay a much higher price for the stock.

If you're unhappy with the way your broker handled your order, write a letter to his manager, says Robert FitzSimmons, a financial planner from Lincoln, Neb.

If that doesn't get results, contact your local office of the National Association of Securities Dealers (NASD), which regulates brokers and brokerage firms. If you don't know how to reach your local NASD office, call 301-590-6500. Or, you can get information on filing a complaint from the Internet site www.nasdr.com.

Saving for son

Q: I want to invest some money for my 26-year-old son's retirement. But I don't want to put it in an account where he could spend it before retirement. Any ideas?

-- Richard Wagner,

Green River, Wyo.

A: If your son has earned income, have him open a Roth IRA. Then you can make the annual $2,000 contributions, says planner Donna Cygan of Albuquerque. That way, he can't withdraw the money without paying a penalty until he's 59 1/2 years old, unless he uses the withdrawal for his education or for a down payment on a first home. Another option, which would require more time and money, would be to have a lawyer set up a trust for your son.

Go abroad?

Q: International stocks and stock mutual funds haven't done so well the past few years. Should we continue investing in them?

-- Mary Ann Grabowski,

Senecaville, Ohio

A: If stocks and stock funds are part of your portfolio, you should have 10% to 15% of the stock portion of your portfolio in international funds, says planner Jon Duncan of Tacoma, Wash.

International stocks can move in different directions from U.S. stocks, lowering the volatility of your portfolio.

GAM International (1-800-426-4685) has the best record of all international funds the past five years: It's up 210%, vs. 87% for the average international fund. The fund carries a 5% sales charge. A no-load alternative is BT International Equity (1-800-730-1313), up 169% the past five years.

Investing for child

Q: I'm a 23-year-old single mother with a 3-year-old son. I don't have a lot of money to invest, but I'd like to start putting money away for my son.

-- Consuela Shorter,

Decatur, Ga.

A: First, says planner Bobby Glass of Fairfax, Va., you could set up an Education IRA. You can put up to $500 a year in that.

If you can invest more than $500, open a regular mutual fund account with a good growth fund. Unlike an IRA, you can tap this account any time, if you need to get to the money. Excelsior Value & Restructuring (1-800-446-1012) will let you start an account for $50, provided you continue to invest until your balances meet the usual minimum of $500. The fund has soared 244% the past five years. It has no sales charge. Another possibility: Safeco Growth No Load (1-800-426-6730), which also will let you start for $50. It's up 220% the past five years.

Drive down debt?

Q: I'm graduating in December with a degree in computer information systems, where starting salaries average $41,000 a year. I have $9,000 in student loans at 7.46% interest. Should I pay them off right away, before I start an investment plan?

-- Brian Duncan,

Clemmons, N.C.

A: There's no need to pay off your loans early. The interest rate is relatively low, and under the new tax law, you can write off up to $1,000 in interest on education loans on your federal income taxes, even if you don't itemize your deductions.

Start your investment plan as soon as you get a job. Make sure you make the maximum contributions to your employer's 401(k) or profit-sharing plans, if they have one. And weight your investments heavily toward stocks and stock mutual funds. They should give you the highest potential earnings, and at your age, you have plenty of time to recover if the stock market takes a dive.

Should I refinance?

Q: I am 45 years old and thought I would refinance my mortgage, going to a 15-year loan at 53/4%. The loan officer suggested instead that I take a 30-year loan at 63/8%, with lower monthly payments, and invest the $400-a-month difference. What do you think?

-- Sanjeev Pathak,

Roswell, Ga.

A: That loan officer has a great idea, says planner Loren Kayfetz of San Ramon, Calif. If you invest in stocks or stock mutual funds, you should earn more on average than the interest you would pay on the 30-year mortgage. But that's over the long term. If you plan to move in the next few years, the bet might not pay off. Your odds of beating that 63/8% rate improve the longer you hold onto your stocks.

This darn house

Q: I'm retired, and my wife plans to retire next year. The mutual funds in our individual retirement account have done quite well, but we still owe $40,000 on our home. Our monthly mortgage payments are $307. Should we use some of our IRA money to pay off the balance of our mortgage?

-- Dean and Shirley Adams,

Springfield, Ill.

A: No! says planner Roger Kadisak of Naperville, Ill. Just being retired doesn't mean you can't have a monthly house payment. If you take money out of your IRA to pay off the mortgage, you'll pay tax on the withdrawal, lose the annual tax deduction for mortgage interest and lose the tax-free earnings on $40,000 in your IRA.

Too many funds?

Q: I read a lot about mutual funds and buy the funds that are mentioned favorably in USA TODAY and elsewhere. Now I have about 20 funds. Do I own too many funds? How can I consolidate some of my investments?

-- Billy Omari,

Oklahoma City

A: A recent study by fund tracker Morningstar suggested that you can build a fully diversified portfolio with eight to 10 funds, says FitzSimmons, the financial planner from Nebraska.

Select eight to 10 funds you like and make them your core investments. Include a mix of large-company, small-company, growth, value and international funds, he says. Those funds should make up at least 70% of your portfolio.

FitzSimmons suggests investing the rest of the portfolio in four or five funds that specialize in a particular sector, such as real estate or technology.

Repay 401(k) loan

Q: I recently changed jobs and want to roll the 401(k) I had with my former employer into an IRA. But I borrowed money from my 401(k) to buy a house, and I haven't paid it all back. What should I do? I also have money invested in some taxable mutual funds.

-- Ted Thomas,

Moses Lake, Wash.

A: Consider selling some of the mutual funds in your taxable account and using the money to pay off your 401(k) loan, says Elizabeth Allen, a financial planner in Farmington Hills, Mich. Otherwise, the Internal Revenue Service will treat the money you haven't repaid as a withdrawal from your retirement savings plan.

You'll have to pay taxes on the money and pay a 10% penalty. By cashing in your taxable mutual funds and paying off the loan, you can roll your money into an IRA without paying taxes or penalties. Your savings will continue to grow tax-deferred, providing more money for your retirement.

Fix IRA mix-up?

Q: I recently transferred two taxable IRAs and a tax-deferred public employees' savings account from one major mutual fund group to another. Somehow, the funds got mixed up and now all my money is invested in a tax-deferred account at the new fund group. What can I do?

-- Stephen Lauko,

Albany, N.Y.

A: You're right to be worried, suggests Daniel Gensler, a financial planner in San Diego. If you don't separate the funds, the IRS will expect you to pay taxes on all the money when you start withdrawing it for retirement, even though you've already paid taxes on the IRAs.

Don't let the matter drop. As an incentive, you might write to the fund companies and offer to indemnify them for any errors in connection with the transfer, Gensler suggests. An indemnity letter assures them you won't sue them for the mistake.

Convert to a Roth IRA?

Q: Should I convert a traditional IRA to a Roth IRA?

-- Robert Padilla,

Pass Christian, Miss.

A: If you're going to convert a traditional IRA to a Roth IRA, do it this year because you can pay the taxes over four years on the money you convert from a traditional IRA.

To be eligible to convert, your adjusted gross income has to be $100,000 or less, whether you are married or single. Pay the taxes from other accounts. Paying the taxes out of the IRA will set your earnings back and make the break-even point later.

Next, ask yourself what your tax bracket will be in retirement. If it will stay the same, you're OK. If it will be lower, then you might be better off with a traditional IRA. If your tax rate will be higher at retirement, a Roth IRA is probably your best bet.

Stocks or funds?

Q: I'm thinking about taking some of my retirement money and putting it into a stock that's done well for more than 20 years. Would I be better off just putting the money into mutual funds?

-- Helene Rodgers,

Salem, Ore.

A: Individual stocks are fine if you are willing to do the research to find good stocks and then monitor their performance regularly. Mutual funds offer a more hands-off approach. Funds offer a diversified portfolio of stocks selected and managed by a professional money manager.

Don't watch too close

Q: I have a 401(k) plan at work with about 20 mutual funds, and now we can make changes on a daily basis. Is that a good idea?

-- Tom Shamblin,

Maryville, Tenn.

A: No way, says planner William Kring of Atlanta. Check your mutual funds' performance at the end of each quarter and if you need to make changes, do that once a year. If you are switching funds more often than that, you're taking too much of a short-term view.

Cash in now?

Q: The stock market has been so erratic lately, I'm worried about the money I have invested for retirement. Is it a good idea to cash in some of those stocks?

-- Douglas Mitchell,

Belchertown, Mass.

A: Trying to time the market is usually a bad idea, says Allen, the financial planner from Michigan.

If you got out of the market at this time last year, you would have missed out on some significant returns. Because you don't plan to use the money for another 10 years, you're probably better off leaving your money in the market.

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Finding an adviser who's right for you

Increasingly, investors are turning to financial professionals for help in managing their portfolios. But finding one that's right for you requires some effort. Some organizations that can help:

• Institute of Certified Financial Planners, 1-800-282-7526, will provide background information on up to three planners in your area who are licensed as certified financial planners, plus information on how to pick a planner.

You also can get information about selecting a planner on the ICFP's consumer education site, www.fp.edu/consumer/findFA.

• If you just want to find out whether a planner is licensed as a CFP, call the CFP board at 1-888-237-6275.
• International Association for Financial Planning, a trade group, will provide a list of planners in your area plus information to help you choose a planner. Call 1-800-945-4237, or check out the organization's Web site, www.iafp.org.
• National Association of Personal Financial Advisors, a trade group, will provide names of fee-only planners in your area who are paid only by the client, and do not receive commissions from investments they recommend.

It also provides questions to ask a potential adviser. Call 1-888-333-6659; on the Internet, www.napfa.org.

• The American Institute of Certified Public Accountants, 1-800-862-4272, can provide a list of CPAs in your area who are personal financial specialists.
• The Securities and Exchange Commission can tell you whether a financial planner is registered with the SEC as an investment adviser. The SEC also provides educational materials. Call 1-800-732-0330, or check out the SEC's Web site at www.sec.gov.

Advisers who were there to help

Members of the Institute of Certified Financial Planners who answered phone calls from USA TODAY readers:

Elizabeth Allen, Harv Ames, Stephen Barnes, John Bergland, Jr., Ginny Brewster, Dennis Carpenter, Stanley Chadsey, Magetta Chantiloupes, Phillip Cook, Donna Cygan, Ray Dale, Jon Duncan, Peg Eddy, Bill Fairchild, John Eichlin, Sandra Field, Robert FitzSimmons, Charles Foster II, James Franklin, Marc Freedman, Linda Gelfand, Dan Gensler, Virginia Gerhart, Bobby Glass, David Hammond, Leonard Hom

Nancy Langdon Jones, Roger Kadisak, Richard Kahler, Jeff Kanaly, Robert Kares, Charles Karp, Bud Kasper, Glenn Kautt, Loren Kayfetz, Glenda Kemple, Brian King, Kenneth Klegon, William Kring, John Longstaff, Diahann Lassus, Dee Lee, George Leupold, Janet Marcantonio, Kalita McCarthy, Earl McMahon, Dennis Means, David Moore, William Morse, Anne Paden-Fink, Rogers Penfield, Chris Phelps, Michael Quackenbush, Grant Rawdin, Morrie Reiff, Lee Reynard, Willoughby Richardson III, Jim Sandager, Aiylam Sankaran, Kirk Sheldon, Maureen Tsu, Bruce Tucker, Tony Vadino, Robert Veasey, Helen Von Dolteren-Fornier, Dale Walters, Maureen Ward, Marysue Wechsler, Curt Weil, Alan Weiss, David Yeske, Woody Young, Greg Zandlo, Sheldon Zimmerman

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