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.