          
          
          
            MUTUAL FUNDS MAY NOT BE WHAT YOU THOUGHT YOU BOUGHT
          
               Did you know that your U.S. government bond fund
          could invest as much as 35% of its assets in junk
          bonds?  Or that your global equity portfolio includes
          U.S. stocks?
               A mutual fund can use a certain name if, under
          normal market conditions, at least 65% of its assets
          are invested in that category, according to Securities
          and Exchange Commission guidelines.
               For funds that call themselves tax-exempt, the
          minimum mix is 80% tax-exempt and 20% other assets.  If
          a fund uses the term municipal, the requirement drops
          back down to 65%.
               Confused?  How about the terms "global" and
          "international"?
               The dictionary defines global as involving the
          world and international as reaching beyond national
          boundaries.  So it should come as no surprise to the
          literally minded that global funds include U.S. stocks
          or bonds, while international funds don't?  But many
          people don't realize this.
               It is not the intention of the SEC to give license
          for funds to mislead investors, but to allow those
          funds the ability to have good management.
               An investor can find out generally what a fund can
          invest in by consulting its prospectus, and can
          discover exactly what a mutual fund owns at a
          particular point in time by consulting its annual or
          semiannual report.
               The report will list all the holdings as of a
          certain date, including complicated assets like
          derivative securities and forward currency positions
          that might never get mentioned in the fund's
          prospectus.  If you want to find out what the fund is
          investing in, the annual report is critical.
               Such a snapshot report is not perfect, but it
          gives investors a better understanding of a fund.  If
          you want a current portfolio mix, call the fund sponsor
          to ask for a fax of the fund's current portfolio.
               Finding out exactly what a mutual fund owns as
          well as what it could buy is crucial information for
          investors.  It strikes at the heart of what is
          happening with your money and what could happen to the
          money, including the risks that are taken.
               The prospectus, often a drab legalistic document,
          lays out the parameters of the fund's investment
          policies, objectives and possible practices, including
          most expenses, but it is not nearly the whole story. 
          The prospectus establishes the rules of the game, but
          it doesn't necessarily establish what the practice is.
               Many funds have elastic investment objectives. 
          These can be wild card risks.
               Under SEC rules that took effect July 1, 1993, new
          prospectuses will be more informative, including, for
          example, the name of the portfolio manager.
               Total fund returns for the last 10 years, a
          discussion of the factors and strategies that affected
          the prior year's performance, and a chart illustrating
          how a $10,000 investment would have fared compared to a
          broad-based market index will also be included in the
          new prospectus or annual report.
               The new guidelines don't require funds to list
          winners and losers among their investments, or how the
          use of futures contracts, derivatives or forward
          currency contracts affect performance.  But some mutual
          funds may choose to divulge such information in keeping
          with the spirit of the guidelines.
               One piece of information they won't have to
          disclose in the prospectus is an asset class that
          comprises less than 5% of the total portfolio.  That's
          the current rule and it isn't about to change.
               While the performance of 5% of a fund's assets
          generally does not have a dramatic impact on the
          performance of the overall fund, its effect can be
          multiplied substantially if the asset is used for
          leverage.  Some extraordinarily powerful residual bond
          can create as much as four times the leverage of a
          traditional bond.
               If interest rates rise, the value of the residual
          bond -- a popular derivative also known as an inverse
          floater -- will drop almost four times as much as a
          regular bond.
               The investor may discover in the fund's Statement
          of Additional Information that the fund can invest in
          such a complicated product but the disclosure won't be
          easy to find.  this document is usually lengthier and
          more turgid than the prospectus.
               Another piece of information not required in a
          mutual fund prospectus or in the annual report is the
          cost of brokerage commissions, which could add up in
          funds with a hefty turnover rate.
               Given current low interest rates and low
          inflation, investors have to be attuned to every cost a
          fund incurs.  They have to be conscious of how much it
          costs to get their money managed.  If a fund has 2% of
          assets in brokerage costs, that may adversely affect
          performance -- or it may not if the portfolio manager
          is skilled at taking short term profits.
               The issue of disclosure about mutual fund
          activities is probably as old as the business itself. 
          But recently it has received more attention because of
          the new SEC rules and other developments.
               In mid-1993 the New York City Department of
          Consumer Affairs charged the Dreyfus Corp. and the
          Franklin Advisers for engaging in deceptive
          advertising.
               Dreyfus was cited for claiming in a brochure that
          its Growth and Income Fund does not invest in junk
          bonds even though its prospectus states that up to 35%
          of its assets may be invested in convertible debt
          securities deemed to be junk bonds.  This is the
          portion of the fund left over after 65% is invested in
          securities that resemble the name of the fund.
               Franklin was cited for claiming in an ad that its
          Valuemark II fund guaranteed retirement income for life
          even though the fund pays an annuity issued by an
          insurance company that is only as secure as the
          insurance company itself.
          
          
          You can have a full team of managers even for a small
          nestegg
          
               If you are not ready for global investing, or are
          seeking domestic investment management to go alongside
          your international portfolio, there is a service
          available for your needs.  Many investors haven't the
          time, experience or inclination to choose and supervise
          their investments.  Family and business might be taking
          every possible moment, and many can't or won't take the
          time to invest properly.  This is where an investment
          manager can help.  Of course it will cost, but if you
          don't have the time and experience to do the job,
          right, a professionally managed portfolio is likely to
          give you a better return than a self-managed portfolio
          that you don't devote time to supervise regularly.
               The Investment Monitor Service is an investment
          management system that uses top institutional money
          managers with proven track records.  Each manager stays
          within his specialty, such as blue chip stocks,
          international stocks, corporate bonds, etc.  The
          monitoring service shifts funds between managers based
          on changing market conditions.  This allows for
          multiple levels of management -- the managers, who are
          constantly managed for performance, and the allocation
          process.  As many as 12 different portfolio models are
          available from the Capital Preservation model to the
          Global Aggressive Growth, depending upon your
          investment needs and goals.  Each model utilizes eight
          to twelve managers, all working on your behalf. 
               All this might sound expensive, but it actually
          costs no more than the management fee in a typical
          mutual fund, while giving you much greater
          diversification than being invested in just one mutual
          fund.  The average management fee is 1.75%, and the
          minimum account size is $25,000.  No opening fees, no
          closing fees, no transaction costs.  The service is
          also available for pension plans, IRAs, and 401K
          rollovers.
               Don't let that management fee put you off. 
          Popular money magazines -- who get most of their money
          from running mutual fund advertising -- have done a
          good job of convincing the public that investment
          management comes free because of all the ads for "no-
          load" mutual funds.  But all "no-load" really means is
          that there is no sales charged added on to the purchase
          price.  There is a management fee, but they don't make
          it visible, and most people don't read the fine print. 
          So you're not getting free management by using a mutual
          fund.
               For more information and a brochure, write
                    Investment Monitor Service 
                    705 Melvin Avenue, Suite 102 
                    Annapolis MD 21401 
          or call (800) 545-8972.
          
          
          
          
          
          
          
