close this bookVolume 7: No. 08
View the documentBook and journal calls
View the documentResearch software (in our CRS 7.04 digest this week)
View the documentMutual funds
View the documentInvestment sites (Part II)

The 03Feb97 issue of Business Week has feature articles and charts for mutual fund investors. This is a good place to learn about small-cap vs. large-cap funds (based on company size) and about growth stocks (poised for future expansion) vs. value stocks (solid companies worth more than their current stock prices). By spreading investments across nine or more fund categories, you're unlikely to have serious losses in any year. However, you may want to keep 20%-40% of your investment in bond funds. Bonds go up when interest rates go down -- just the opposite of stock funds.

Market shifts cause 80% of all mutual funds to fall below the Standard & Poors 500 Index -- 22.9% last year -- but you can find relatively safe investments in the other 20% if you look for consistent performance over 5-10 years. Sectors with the best historical returns include financial stocks, technology, health care, and (until the past few years) communications and small-cap growth stocks. Growth funds tend to outperform value funds by one or two percentage points, esp. small-cap and mid-cap growth funds. Or you can gamble on new, small, nimble funds with 1996 returns of up to 60% or 3-year and 5-year average returns of 15%-25%. The BW articles recommend top-performing funds in each category. Other financial magazines -- Forbes, Barron's, etc. -- have similar special issues each year.