suhre (04/02/83)
The current issue of Money magazine has several articles discussing investing in mutual funds, both load and no-load. There is also a rating of various of funds. Maurice Suhre
suhre@trw-unix.UUCP (07/21/83)
The advantages/disadvantages of mutual funds and the stock market in general is a long and possibly involved subject. One recent issue of MONEY Magazine had an article about how to invest in Mutual Funds. I would also recommend the book "Gaining on the Market" (haven't got the author's name with me). Research suggests that No-load funds perform as well as Load funds. The "load" is a salesman's commission. Mutual funds in general offer an easy way to get diversity in the market as well as allow additional investments to be made in relatively small increments ($100 or so). One might take the view that they won't bother trying to pick individual stocks, but will just try to determine the major market moves. Then the strategy becomes buy/switch into the funds at or near perceived bottoms, and buy/switch into money market funds at or near perceived tops. There are families of no-load funds that allow this at little or no charge. The previously mentioned book has a timing strategy for estimating major market directions. Also, there are the "elves" of Wall $treet Week which provide trend information. Switching is regarded as a sale for tax purposes, and depending on how whippy the market is, it may be a struggle for long-term capital gains. An interesting factor is the political election cycle. Imagine that the incoming administration implements some unpopular policies to correct for the excesses of the previous administration (which may have been their own). Then the market starts down. A couple of years later (2 to be exact) they say something like "Gee, it's time to start trying to get re-elected". Presto, as if by magic the Fed gets in step and everything starts getting cranked up and the market rises for 2 years. The wisdom is that the market discounts cycles, but if you look at a long term chart of the DOW (Dow Jones Industrials) and mark where the elections take place, it is very interesting. There aren't very many sure things, and the stock market isn't one of them. However, it appears that the use of mutual funds (with some care in selection) and major cycle timing strategies can provide ample returns to those with patience and discipline. If you will panic any day that the value of the fund is less than the previous day, stay away. Certainly before buying, do some research. The No-Load Fund Investor Handbook has a lot of information and seemed well written to me although a little tedious. The only "error" seemed to be in the comparison of load vs no-load funds. If you invest X in a load fund, and they take 8% commission, and you also invest another X in a no-load fund, and both funds grow at the same rate, they at the end you will have Y in the no-load and .92Y in the load fund. 8% of the final amount may be significant in absolute terms, but it is still only 8%. About every 3 months Barron's has a mutual fund performance issue which provides a lot of statistical information. I hope this hasn't cluttered up the net too much, but there doesn't seem to be a lot of activity on this net. Maurice
lwc@mgweed.UUCP (10/25/83)
Having done a considerable amount of investigation into Mutual funds lately, and in response to a recent query in this news group about Mutual funds, here are some of the things I found out: 1) There are basically two types of mutual funds - load and no-load funds. The difference being load funds are sold by a salesman who takes a commission of typically 8.5% of gross amount of your investment, where no-load funds are commission free. This means an investment of $1000.00 in a load fund will net you an investment of $915.00, with $85.00 going to a salesman for his trouble. Since the performance of no-load funds is every bit as good as the performance of load funds, investing in a load fund seems to be a poor investment. 2) Mutual funds are often part of families of funds who's members each have a different investment objective. One may specialize in investing in growth stocks, another may have an objective of carefully preserving your capital while providing you with a certain amount of fixed income from interest and dividends, and so on. Often times an investment in a fund that is a member of such a family of funds can be switched from one type of investment to another, as often as one wishes, at no cost. 3) Shares in a mutual fund are purchased at Net Asset Value (NAV), which is calculated at the close of each trading day, and is simply the total assets of the fund (including closing values of held stocks, cash on hand, etc.) divided by the number of shares outstanding. This figure is published in most major newspapers, the Wall Street Journal or Barons. Included in the NAV are any undistributed capital gains (both short and long term), income from dividends, or income from interest on cash temporarily invested in cash accounts. Usually once a year the fund will distribute these to shareholders, which can have several different effects, depending on what you do with your distributions. If you elect to take the distribution in cash, the number of shares you hold remains the same, but the NAV of your shares are reduced by the amount of the distribution. You are of course obliged to pay taxes on the distribution, and the fund must specify how much of the distribution is do to short and long term capital gain, and how much is do to dividends. If you elect to reinvest the distribution, the NAV of the shares you hold is still reduced by the amount of the distribution, but the number of shares you own will increase a corresponding amount. The kicker in this is that you are still obliged to pay taxes on the distribution, even though you've taken no cash. 4) A mutual fund must provide you with a prospectus before it can accept any money from you. The prospectus must clearly state the investment objective of the fund, and will describe the funds past performance. If you had invested money in almost any of the many mutual funds at the start of the recent bull market, you would have almost certainly made money. After all, mutual funds invest in a variety of stocks, and since the market in general has gone up, most funds would have also gone up. The trick, of course, is finding a fund that goes up more than most of the other funds, and is also able to preserve any gains when the market turns around. To help you find such a fund, I recommend the Aug issue of Forbes magazine. They rate the performance of all the funds against each other, and grade that performance in terms of both bull and bear markets. The Oct issue of Changing Times also rates the top performing funds, but is nowhere near as comprehensive as Forbes. The "NoLoad Mutual Fund Association" publishes a directory of member funds, and can be obtained by sending $2.00 to: NoLoad Mutual Fund Association, Inc 11 Penn Plaza, Suite 2204 New York, NY 10001 (212) 563-4540 Larry Ciesla
wjb@purdue.UUCP (William J Bouma) (02/28/86)
If you want a book that gives straightforward, easy to understand advice on investments, try to find Peter Passell's _How to Invest Your Money 198x_.* I got the 1985 book, but a friend I recommended it to says there's now an 86 book. You should be able to find it at your local B. Dalton's/Waldenbooks/Cohl's etc. for about $2.95. The book describes all sorts of investments (bonds, funds, stocks, GNMA's, etc.) and tells the strengths and weaknesses of each; it also tells which kind of investments are best for which kind of people. Best of all, it has phone numbers and addresses for obtaining prospectuses (prospecti?) and such. Good reading and better investing! Steve Chapin * I'm not positive on the title...something like that. ---------- Disclaimer: (yawn) These are all my opinions. Even my wife hates them. Just because the blind lead the blind doesn't mean they're not going in the right direction...
ritter@spp1.UUCP (Phillip A. Ritter) (03/12/86)
The current issue of Forbes magazine (I didn't notice the exact date - its the
one that just came in the mail, so it must be dated around 10 March) has a very
interesting article about the growth of mutual funds, especially bond funds.
It seems clear that the load/no-load discussions lately indicate an interest in
the funds, so this article in Forbes will probably be of interest to many of
you.
The basic theses of the article is that:
a) The bond funds are growing at an astronomical rate (sales for 1985 were
more that 4 times the previous record).
b) Sales of ``safe'' funds (those investing largely or only in bonds or
securities guarenteed by the U.S. Gov.) are growing fastest.
c) Sales seem to be due to people missing the double-digit CD rates of two
years ago.
This article goes on to remind people that, although the interest is guarenteed
by the Feds, and the principle will be paid back at maturity, there is still
considerable risk in these markets since the market value of the securities will
fall. The Forbes article describes the current situation as a ``mania'', where
they define a mania to be a situation where many unsuspecting (perhaps misled)
investors are sure to get burned. The current bond fund market is compared to
the market for growth stock funds in the late sixties.
I don't really wan't to say more than this. I have only read the article once,
casually. Also, remember that Forbes tends to be conservative (where
conservative does not mean avoiding risks, simply understanding them) and
contrarian (anything that everyone is doing is probably a bad investment). I
simply feel that anyone who is going to commit a significant amount of money to
any investment needs to have as much information that can be obtained as
possible, and this article is very informative.
Phil Ritter
...ihnp4!trwrb!trwspp!spp1!frank!grimm!phil
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Phillip A. Ritter