U.S. Trust recently completed a study of investors aged 35-54 with adjusted gross incomes above $230,000 or net worths of more than $3 million. It found that these well-heeled individuals had just 38 percent of their portfolios invested in domestic equities, and nearly half of their holdings were in cash and fixed-income investments. The Option Advisor newsletter (Box 46709, Cincinnati, OH 45246) believes all this excess cash will eventually help fuel further market gains, "with the biggest gains chalked up by the technology sector."

Robert Armknecht of Galaxy Equity Growth Fund buys high-quality companies whose earnings are growing faster than the economy. This lets him get into cyclical areas on the way up. Galaxy's 27.2 percent average annual return over the past five years is 4 percentage points more than the S&P 500's. Recent favorite stocks: GE, Mobil, American International Group, Citicorp, Tyco International, Associates First Capital.Fortunes were made in bank consolidation during the '90s. Now it's the insurance stocks' turn, says Paul La Monica of Smart Money magazine (1755 Broadway, New York, NY 10019). "Industry experts believe mergers will improve efficiency and that both premiums and stock prices have bottomed." La Monica likes insurance stocks that could either continue to do well independently or could get taken out at hefty premiums. His property/casualty picks: ACE, Everest Reinsurance, Medical Assurance, XL Capital. His life insurance picks: American General, Conseco, Hartford Financial, Protective Life, Torchmark, UNUM.

This country's transition from an industrial-based to an information-based economy is the most important investment theme of our age, says Erik Gustafson of Stein Roe Growth Stock Fund, which has beaten the S&P 500 index in the last one-, three- and 10-year periods. "Six companies that build data infrastructure (Cisco Systems, Lucent Technologies, Tellabs), carry data (MCI WorldCom, AT&T), and share it (EMC) roll the whole information age into one package."

Tax-free municipal bonds are now a screaming buy if you're in the higher tax brackets, says Bill Hornbarger, fixed-income strategist at AG Edwards. "Long-term insured munis recently provided yields equivalent to 9 percent to someone in the 31 percent federal tax bracket, and up to 11 percent for investors in high-tax states like California."

If you're looking for a decent fixed return at moderate risk to balance a portfolio overloaded with equity winners, consider the preferred stocks issued by closed-end mutual funds, advises Standard & Poor's Outlook (55 Water St., New York, NY 10041). The Outlook recently recommended six such preferreds yielding 8 percent to 9 percent: Gabelli Equity Trust, Gabelli Global Multimedia Trust, General American Investors, Royce Focus Trust, Royce Micro-Cap Trust, Royce Value Trust. Part of the yield of each is taxed at the lower capital-gains rate.

Considering an online broker? Gomez Advisors' Web site www.gomez.com ranks them for ease of use, on-site resources, cost, customer confidence and best overall service. It also allows investors to categorize themselves, then recommends a list of brokers that best suit their profile. Gomez.com membership, free with registration, includes use of the site's message boards and an e-mail newsletter.

Investor's Notebook is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.

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