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1997-98: REVIEW AND OUTLOOK | The Basics of Mutual
Fund Investing

How to Use Our Mutual Fund Pages

January 04, 1998

Our new and improved annual mutual fund listings are designed not only to tell you how your funds did in 1997, but to help you shop for funds and learn more about fund investing.

What do I look at first?

If you are a novice, read the stories on this page for information on lhow to pick funds and design a portfolio.


How do I choose which types of stock fund categories are best for me?

If you want funds that invest in U.S. companies--the first nine categories (pages D12-13)-- your primary decision should be based on your appetite for risk. The "large" funds buy stocks of large companies, which have been less volatile and carry less risk than small companies. The "mid-cap" level is for companies in between.

To create the first nine categories, Morningstar combined the company-size criterion with "growth," "value" or "blend." These reflect the companies' stock prices--high ("growth") or low ("value") relative to company profits or asset values, as measured by price-to-earnings or price-to-book-value ratios. "Blend" funds have combinations of the two.

Note that neither type of company is necessarily a good buy--value stocks may be in declining industries and growth stocks may not live up to their name.

Although there is no exact formula, if you are more conservative, consider weighing your portfolio more heavily into large growth, large blend or large value. If you can afford to take more risk, look at small growth, small blend and small value .


How many different types of funds do I need?

Generally, experts recommend that most investors have at least one fund in at least three or four different categories, ranging from aggressive to conservative and including bond and money market funds. Once you have a basic diversified fund portfolio, you can make adjustments. If you are willing to take more risk, weigh your portfolio more heavily toward aggressive funds, and so on. If you want just one fund, consider a "hybrid fund" that invests in both stocks and bonds; some of these, often called "balanced" funds, are listed on D15.


Why should I worry about the difference between "growth" and "value" funds?

By organizing the funds this way, Morningstar tells you at a glance something about the stocks in the fund. You get a sense of whether the fund managers chose stocks that are regarded as already on the road to success ("growth") or stocks that have been overlooked but might have potential ("value").

Such information is not always current, but it's one of the few objective ways of seeing what fund managers are doing. The categories with fewer funds listed are for investors who want to organize their portfolios in more specific ways.


What other criteria can I use in picking funds?

The Morninstar listings include various measures of performance, such as the "total percentage return," as well as expenses, fund sales charges (loads), and the manager tenure. We also include two less common pieces of information: a "weak-market rank" and "worst three months." (See explanations on D13 and the article "Afraid of the Bear?" on the following page.)


Where can I quickly see how my funds did in 1997?

The tables on D16-18 cover almost all U.S. mutual funds, providing the total annualized return for one, two and five years. These carry a letter grade for most funds, assigned by Lipper Analytical, another independent fund tracker. These grades reflect only 1997 performance.


How can I learn more about investing?

The Times' Business Section publishes information and educational articles daily, as well as special Your Money pages every Sunday and Wall Street, California pages every Tuesday.

At our Investment Strategies Conference on Feb. 7-8, money managers and other experts will discuss a variety of issues, from stock-picking to planning for retirement. (See D31.)

You can also find more information at The Times' Web site. Start with a series of primers at

And, of course, hundreds of books and magazines are devoted to the subject.


How can I reach a mutual fund company?

The easiest way is to call. Phone numbers--most toll-free--are provided on D15.

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