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From: lwc@mgweed.UUCP
Newsgroups: net.invest
Subject: Mutual Funds
Message-ID: <4318@mgweed.UUCP>
Date: Tue, 25-Oct-83 13:27:09 EDT
Article-I.D.: mgweed.4318
Posted: Tue Oct 25 13:27:09 1983
Date-Received: Thu, 27-Oct-83 02:44:26 EDT
Organization: Western Electric - Montgomery Illinois
Lines: 71

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