Dear Mr. Berko:

I have more than $380,000 in a money market fund from selling my stock in December because I was afraid of the market. I’m an extremely conservative investor in the 33 percent bracket who needs more emphasis on income than growth. I moved from my broker’s money market fund, which was paying 0.45 percent, to Wachovia Bank, paying 1.2 percent.

How can Wachovia pay three times as much as my broker? What are money market funds paying in other countries? If they pay more, would it make sense to move my money to a foreign bank? My broker, realizing that he may lose my account, tells me he can recommend a conservative portfolio of half stocks and half bonds that yield about 5.5 percent. Please tell me what you think I should do.

G.S. Durham, N.C.

Dear G.S.:

The reason bank money market accounts have higher yields than your brokerage money market fund is cost. Many brokerages charge three-quarters of 1 percent to service their money market funds, and that’s turnpike robbery. Wachovia can pay 1.2 percent because its fees are much, much lower than your broker’s fees.

MMFs in Great Britain yield 4.25 percent, and in Australia they pay 5.6 percent. Or you can put your money closer to home and get 2.5 percent from Canadian MMFs. In England, you can visit Barclays Bank or National Westminster. In Australia, check out ING Bank and the Commonwealth Bank of Australia. But if you prefer to stay in North America, then ring the Bank of Montreal or the Bank of Canada.

You should be mindful that all three countries can tax the earned interest on your MMF and that currency fluctuation in each country could cause you to suffer a capital loss when you reconvert your money from that country’s currency to U.S. dollars.

Yes, composing a portfolio (half bonds and half dividend stocks) is as easy as falling off a piece of cake. However, I feel that a portfolio of half bonds and half stocks is shortsighted.

Do you know that bond interest is taxed at your ordinary income rate of 33 percent while common stock dividends are taxed at just 15 percent? I suggest committing the entire $380,000 to dividend stocks, but not in one plop. Do it in thirds, beginning with $125,000 now; four to six months later, commit the second $125,000; four to six months later, invest the remaining $130,000. You should be able to earn an average of about 6 percent on conservative dividend-paying common stocks with a low beta.

A “beta” is a measure of a stock’s volatility in relation to the market. If the Dow Jones industrial average moves up or down 10 percent, a stock with a beta of 1 may also move up or down 10 percent. By contrast, a stock with a beta of 0.5 may move only half as much as the Dow. Your broker should select a portfolio of low-beta issues trading near the bottom of their 12-month price range.

He should select conservative issues that have a steady dividend stream plus a hint of future promise. You must be mindful that in order to increase your income, you must assume some market risks as a trade-off. The following are examples of issues that he might consider.

Look at Bristol-Myers Squibb Co. (BMY-$25.55), which pays $1.12 and yields 4.4 percent. BMY is trading close to its 12-month low of $21, and 2005 earnings are expected to rise to $1.70 per share from this year’s expected $1.53. In fact, BMY might raise its dividend in the coming 12 months, and trading at 15 times earnings, the stock is considered to be oversold.

Next, peek at Gabelli Utility Trust (GUT-$8.76), a closed-end fund that invests in companies providing services or equipment for the production and generation of electricity, gas and water. It yields 8.2 percent.

On this list you can also include SBC Communications Inc. (SBC-$24.59), one of the Baby Bells, which yields 5.1 percent. And Unitil Corp. (UTL-$26.71), an electric utility serving New Hampshire and parts of Massachusetts and yielding 5.2 percent.

Consider Tupperware Corp. (TUP-$17.35), which makes food storage containers and has a 5.07 percent yield; a real estate investment trust like Apartment Investment and Management Co. (AIV-$28.82), with an 8.3 percent dividend yield; and Enterprise Products Partners L.P. (EPD-$20.41), a producer of natural gas liquids that yields 7.3 percent.

These combined issues would give you an after-tax yield of 5.4 percent, which in your bracket is equivalent to a 7.8 percent corporate bond yield. There are many more dividend stocks providing similar yields with which a conservative income investor would be comfortable.

Your broker should easily be able to compose a selection of conservative dividend issues into a portfolio yielding 6 percent. If he selects wisely, the portfolio should be insulated from the negative momentum of the market. It’s even possible that your dividend income could increase modestly each year, and it’s even more than remotely possible that this portfolio might increase in market value.

If your broker does his job properly, he can manage the risks for you and take a lot of the worry from your evening sleep.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.