Q: I am a widow, much of whose income comes from the stocks bought by my late husband. Would it not be wise to sell them now when they are high? I figure they must fall sooner or later, remembering as I do the debacle of 1929. I would appreciate your advice.

A: Well, I don't think we are in for another 1929 -- there are enough differences between now and then to warrant confidence that we won't have a complete bust. As I write this, I also think we still have a little way to go yet on this long-term bull market.

But surely the upward trend will not be uninterrupted -- there will be minor corrections and quite possibly a major drop in the neighborhood of 10 to 15 percent. Does this mean you should sell out in anticipation of such a drop? Not necessarily; it depends on your reason for holding the stocks until now.

If you've been hanging on to the stocks your late husband bought in hopes of a capital gain, perhaps you should take the money and run. But if you've held the stocks for income -- as your letter indicates -- then what difference does it make whether the share value in the market goes up or down?

Let's take a purely hypothetical case. Suppose at his death your husband left you 500 shares of Niagara Mohawk Power, worth at that time $17 a share and paying a $2 dividend. Now your shares are worth about $20, and the dividend has gone up to $2.08. If you were looking for a capital gain, you could sell the shares and pick up a profit of $1,500.

But then where would you invest the $10,000 you would realize from the sale? If you keep the shares, the $1,040 annual dividend represents a return of 10.4 percent, based on current market value. Suppose you keep them and the market value drops back to the original $17 a share -- or even $15? Niagara Mohawk is a pretty good stock -- you can anticipate that the company will continue to cover the $2.08 dividend, and perhaps even increase it again in the next year or two.

My first point is that if you're holding the stock for income, the income will continue even if the share value drops on the market. Second point: If you sell the stocks, you will have to find someplace else to invest the proceeds -- and you may not be able to do as well as you're doing now.

Of course, all of this is purely theoretical; I have no idea what your portfolio looks like. You may very well be holding stocks on which the dividend return is very low, and you may be better off selling out at a high price and investing the proceeds elsewhere for a larger return. You might want to find a broker you trust and have him or her review your portfolio and make some specific recommendations.

Q: In 1981 I invested $10,388 in a long-term municipal bond paying 11.5 percent interest. After receiving only four interest checks in two years, the company went bankrupt. It was then taken over by another company, and my investment went down almost $3,900 in value. In 1985 the other company also closed down, and I lost the remaining $6,488. Shouldn't my investment have been insured by the broker through whom I bought the bond? Do I have any recourse?

A: The broker through whom you buy any security normally will not insure your investment; generally, market risk must be carried by the buyer and owner of the security. Your account with a broker may be insured for up to $500,000 by the Securities Investor Protection Corp. (SIPC), but that coverage insures against broker default, not against risks inherent in the securities themselves.

The question of recourse depends on the circumstances of the purchase. If the brokerage representative with whom you dealt led you to believe (erroneously) that the bond was insured, or if his recommendation of that particular bond was at odds with your financial situation, your investment goal and the amount of risk you could bear, you might be able to recoup your investment.

But if it was simply a judgment call and it turns out -- as it did in this case -- that his judgment (and yours, because the final decision to buy was yours) was wrong, then you must swallow the bitter pill. The only recourse you have is a long-term capital loss on Schedule D of your 1985 tax return.