Three fund groups offer free advice on investing

STAYING AHEAD

March 14, 1993|By JANE BRYANT QUINN

New York -- Are you totally confused by mutual funds? Do you know you should own some but aren't sure exactly which types you should choose?

Three mutual fund groups are offering free help. You fill out a questionnaire, giving such information as your age, your assets, your investment goals and how you feel about risk. In return, you get investment advice -- how much money to put in stocks, how much in bonds, how much in cash -- and prospectuses for the funds that the service recommends. All the funds are no-load (no upfront sales charge) or low-load.

The Dreyfus Investment Allocation Service in New York ([800] 782-6620) offers recommendations to large and small investors alike. Its strategy is buy-and-hold, pegged to the risk that Dreyfus thinks you can afford. If you want a new plan, you can call for another free recommendation.

SteinRoe Counselor in Chicago ([800] 322-8222) wants investors with at least $50,000 to manage. It sells you a selection of funds, based on your circumstances and the market outlook.

When the outlook changes, SteinRoe recommends changes in the amount of money invested in each fund. You can readjust your funds, free of charge, by calling.

Or, SteinRoe will do it for you automatically -- charging 1 percent of your first $100,000 invested, declining to 0.25 percent for amounts over $1 million. (But why pay for this service, if you can do it yourself at no cost?)

Fidelity Investments in Boston ([800] 847-0350) will send you a simple FundMatch workbook, which leads small investors into one of its three asset-allocation mutual funds. Each fund has a different mix of stocks, bonds and cash investments.

For those with at least $100,000 to invest, Fidelity offers its Portfolio Advisory Services (PAS). PAS will manage your fund investments, making changes as the markets change. You pay 1 percent of your first $100,000 in assets, declining to 0.25 percent for accounts over $2 million.

So much for the details. The big question is, how good is the advice? My associate, Amy Eskind, made up profiles for four sample investors and presented them to all three services. Here's what we found:

Dreyfus is the most conservative, by far. Richard Hoey, an economist who is the source of the program's strategic thinking, says that too much money is being managed today by young advisers who have never seen a genuine, long-lived bear market in stocks and bonds.

"People forget that from January 1973 to October 1974, the Standard & Poor's 500 stock average dropped 48 percent," he says.

Hoey insists that you start with three to six months' income in an emergency fund. He makes especially conservative recommendations to investors with modest incomes or a lot of personal debt.

If you're in that position, he says, you might suddenly need some cash from your investments to help pay your bills. You might even be advised to keep all your money in money-market mutual funds.

SteinRoe is much more aggressive -- advising 90 percent stocks for a risk-taking 40-year-old and 40 percent stocks for a conservative 65-year-old. This advisory service tries to maximize your long-term investment returns without worrying as much as Dreyfus does about a bad two-year bear market.

As for Fidelity, its basic workbook isn't a true asset-planner. It's simply a sales document for one of the company's three asset-allocation funds.

A more specific questionnaire goes to prospects with $100,000 or more. You get back a list of recommended mutual funds, with minimal discussion of how they will meet your investment needs. To find out exactly how Fidelity would allocate your money among the funds, you must sign up for Fidelity's portfolio advisory services.

None of the kits includes past-performance data for the recommended portfolios, so you cannot tell how well they did. You might try thefree Dreyfus or SteinRoe plans, choosing the one that better fits your appetite for risk. But there's no proof now that Fidelity's or SteinRoe's continuous money-switching services work any better than buying funds and holding them long term.

(Baltimore-based T. Rowe Price offers a free financial planning workbook, the Asset Mix Worksheet, that includes sample portfolios of no-load funds for a diversified investment plan. Call [800] 638-5660.)

1993, Washington Post Writers Group

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