Forced Diversification Good for O'Neill.

Congratulations, Treasury Secretary Paul O'Neill, on that move to sell your personal stock holdings and put the money in more diversified investments.

I realize you were, well, kind of pressured into this by critics who said you shouldn't hang on to shares of your former employer, Alcoa Inc., after you took your government job.

Whatever the politics, those scolds did you a favor. As it happens, selling Alcoa and smaller slugs of two other stocks, and moving into "diversified investment funds," as the announcement put it, makes great money-management sense.

Those Alcoa shares had a pretty good run of late, returning 25 percent a year over the last five years and a sparkling 73 percent since the end of September. As the company's chief executive for a dozen years, you had something to do with that.

That was then. From here on a fund that spreads your bets will still give you a good shot at growth, and at the same time reduce your exposure to risk. With a nest egg of $100 million, you need heavy-duty risk protection.

Diversification serves that purpose well for all kinds of investors; Treasury secretaries are probably no exception.

As a politician might say, let's look at the record. From the end of 1989 through 2000, Alcoa shares averaged an eminently respectable 14.72 percent annual return.

But you could have seen similar, or even better, results in a good mutual fund. An index fund, perhaps? The Standard & Poor's 500 Index returned 15.23 percent a year over the same stretch. If by chance you d used a managed fund like the Dodge & Cox Stock Fund, you'd have made out better still, gaining 15.27 percent.

Heck, if you pick an S&P 500 fund you'll get a slice of Alcoa that way too. Last I checked my Bloomberg, the stock accounted for 0.3 percent of the index.

Of course investors of your size usually don't go with a mutual fund. They invest through "institutional" portfolios that are cheaper and more flexible -- and avoid those noisome annual capital-gains distributions on which mutual fund investors must pay taxes, even when they automatically reinvest the money in the fund.

You've probably had all the tax aggravation you need for a while coping with the capital-gains liability on your stock sales.

But as you choose how to deploy your assets now, perhaps you'll pause for a minute and think about mutual funds. If it weren't for the issue of taxes on gains distributions, a fund or package of funds would make quite a good vehicle for an investor like, you.

Wouldn't it be something if this flap over divesting your Alcoa stock got you thinking, along these lines? Then the situation might wind up having unintended benefits not only for you, but for the rest of us.