Mutual funds provide first step to small investor just starting

The Ticker

March 19, 1997|By Julius Westheimer

TODAY WE SHARE more suggestions for the so-called small investor: A good place to start is with mutual funds. "Mutual funds were invented to solve several beginners' concerns," says the valuable paperback, "The Small Investor," by Jim Gard. "Funds' track records have been good and they generally achieve better results with less work for people with limited sums of money."

Mutual funds -- pools of investment money under professional management -- also provide diversification, a key requirement for small investors. Through stock brokers or no-load mutual fund firms, investors put in their money and professionals invest it. Funds likewise involve less risk for the small investor.

A good way to evaluate mutual funds is to examine past records through Morningstar Reports or Value Line Mutual Funds Reports. "If a manager has been with one fund for 10 years," Mr. Gard observes, "the past decade's performance says something about its manager. But if the fund has a new manager, past performance doesn't mean much."

Speaking of new managers, Louis G. Navellier, a well-known "momentum" investor, was ousted Friday by MFS Investment Management as manager of a fund that bears his name, the Navellier Aggressive Small Cap Equity Fund. And the Fidelity Magellan Fund, the nation's largest mutual fund, has shifted managers frequently in recent years.

Investment clubs also provide help for the stock market newcomer. Clubs consist of a group of people who agree to share their money, knowledge and work. For help in getting started, call sales managers of well-known local brokerage firms. And for free information, write or call the National Association of Investment Clubs, 711 W. 13-Mile Road, Madison Heights, Mich. 48071. Phone 810-583-6242.

More advice for the small investor:

Don't allow yourself to be hustled into buying a stock by an overly agressive broker. There are no emergencies in this business; nothing will run away. Be careful of such phrases as, "It's our firm's winning idea this morning," "Our partners are putting personal money in this stock" and "There's a limited amount of stock available; everybody's buying it."

Regarding the above, a veteran investment man once warned me, "When you hear 'everybody' is buying a stock, ask who's selling."

Here are some suggested books for the small investor:

"A Fool and His Money," by Jon Rothchild.

"The Intelligent Investor," by Benjamin Graham.

"The Beardstown Ladies Stitch-in-Time Guide to Growing Your Nest Egg," by the Beardstown Ladies.

"The Wealthy Barber: The Common Sense Guide to Becoming Financially Independent," by David Chilton.

"Once in Golconda," by John Brooks, a fascinating account of the 1929 stock market crash, its causes and consequences. It's out of print, but can be readily found in used book stores and libraries.

Good magazines include Money, Kiplinger's Personal Finance, Barron's, Business Week, Smart Money and Forbes.

Pub Date: 3/19/97

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