Frank Cappiello Jr., an investment adviser and money manager who is a regular on the TV show "Wall Street Week," got an early start in the stock market.

When he was 14, his father gave him $2,500. He gave the same amount to Cappiello's brother and sister. His father, who owned a New Jersey dry cleaning business, was curious to see what they would do with the money.Cappiello's brother and sister quickly squandered it on bikes, toys and jaunts with friends. Little Frank had other ideas. He turned to a rich uncle for tips on hot stocks.

How those tips fared and what happened to Cappiello's $2,500 windfall shaped his life, taught him precious lessons about the risks and rewards of the stock market and the value of free advice.

Today, Cappiello makes a handsome living selling his advice - and investing other people's money - as president of McCullough, Andrews & Cappiello, a Baltimore, Md., firm that manages assets of more than $900 million.

At 62, he has been studying the stock market for nearly half a century. Cappiello holds an MBA from Harvard University and a degree in economics from Notre Dame. His firm manages hundreds of millions of dollars for mutual fund investors and clients such as the cities of San Francisco and Oakland, the University of Santa Clara and St. Mary's College.

His record at making money for his clients is so good that Cappiello has been a regular on "Wall Street Week" since the popular program's premier in October 1970. In 1988 Cappiello topped every guest on the show with the performance of his stock recommendations over the year.

Lately, Cappiello's counsel is colored by an optimistic view of the prospects for the U.S. economy, despite the fact that Washington statistics mills have been spinning out signals of a significant slowdown in consumer and business spending.

"Quarterly, even monthly, data reach us so late that we don't really know what's going on in the economy," Cappiello said in a recent interview. "It's like looking at a dying star. By the time the light from the star reaches us, the star is already dead."

Capiello said he thinks there's plenty of life left in the U.S. economy. The reason: The economies of Europe and Asia continue to grow at a rapid clip. In the modern world of multinational companies, brisk international trade and increasing financial links between countries, he says the health of the world economy should keep U.S. business afloat.

Cappiello also is buoyed by the pessimism he sees around him. When Wall Street and the press struggle to fight off fits of gloom about the economy, it's a great time to buy stocks, he says.

His favorites:

- Regional telephone companies. Capiello said he thinks the "Baby Bells" stand to profit from the growing popularity of cellular telephones and can count on state regulators to put a floor under company earnings when times are bad. In this industry, earnings growth rates of 6 percent to 7 percent are standard - rates that could be lifted by cellular growth - and dividends routinely are about 5 percent.

Southwestern Bell, Southern Bell, Pacific Telesis and Southern New England Telephone are fast-growing companies with stakes in the cellular business.

- Banks. After several years of writing off foreign loans and farm debt, bank earnings are springing back and bank stocks are looking relatively cheap. Cappiello's pick: First Interstate Bancorp, a Los Angeles bank holding company that's considered a takeover prospect.

- Mutual funds that invest in small capitalization growth stocks are risky but promise large rewards. The shares of small companies have been out of favor on Wall Street for six years, the longest period of weak demand for these stocks since the Great Depression. Cappiello says the moment is right for an upswing in the fortunes of small companies, since many have reported phenomenal earnings growth in recent months.

(Beware: Don't invest directly in the shares of small company stocks unless you know the businesses in microscopic detail, Cappiello says. "We buy 20 stocks and think they'll all go up," he says of the two mutual funds sold by his firm. "Inevitably, three or four are workhorses, pulling up the rest. Three or four are losers. And the rest go up only a little.")

But Cappiello has a few words of wisdom on taking stock tips: "Never, ever do it. I mean, never ever."

His aversion to whispered suggestions on the stock market date back to that $2,500 his father gave him.

Cappiello's rich uncle, a professional investor who made much of his money at country clubs and pool sides with calls to a stockbroker, gave his young nephew several tips. All of the stocks went nowhere. Cappiello didn't lose money, but then he didn't make any either.

That changed when he visited his sister at a Catholic boarding school. He noticed she and all her friends kept their makeup on counters in the restroom. They all used different brands of lipsticks, face powders and eye liners. But each shelf had the same hair spray: A brand called Rayette.

Cappiello, who never had heard of the product, asked his sister about the choice of hair spray. She said it simply was the best on the market. He quickly wrote down the name of the company and requested its financial reports.

While he waited for the mail from Rayette to arrive, Cappiello asked his rich uncle if he had heard of the company. "He said, `You don't want to invest in that junky company,' " Cappiello recalled. "He said their earnings statement was awful and their balance sheet was a mess."

That was true, Cappiello soon learned. But the bleak story of the latest annual report masked details included in the more recent, quarterly financial statements Rayette sent to the boy investor. "The company was getting its act together and starting a turnaround," Cappiello said.

Cappiello sold the stocks his uncle had advised him to buy and invested $2,500 in Rayette. In a year, the value of the stock doubled.

But Cappiello didn't have long to gloat. After the stock price ballooned, he sold his Rayette stock and, on a tip from a friend, invested $5,000 in an oil stock. A few months later, he had lost two-thirds of the profit from the Rayette investment.

The experience taught Cappiello more than one lesson:

- Never blindly follow the advice of anyone in buying stocks.

- Don't be afraid to poke around, looking for the freshest information available on a company's products and finances. "Balance sheets and income statements in annual reports are interesting," Cappiello said. "But all they are is a reflection of the past."

However, Cappiello admitted that he's had trouble imparting the lessons from his early years to his children. They, like many of their generation, seem more interested in spending than in investing.

One of Cappiello's daughters, a college senior, recently made it clear that she won't be needing any $2,500 gifts. She requested an Alpha Romeo as a graduation present.