Brutal numbers await mutual fund investors Current quarter is one to forget


September 20, 1998|By Bill Atkinson

MUTUAL FUND investors are taking a toughness test.

It began in July when the stock market peaked and quickly came spinning down to Earth. At the end of this month, when investors begin receiving their quarterly mutual fund statements and start assessing the damage, the test will get even more difficult.

The quarter is shaping up to be one of the worst on record for mutual funds, and the results are bound to shake even the most seasoned investor.

The average mutual fund fell 15.90 percent from June 30 to Sept. 10, and some are down three times that, according to Lipper Analytical Services Inc., a Summit, N.J.-based company that tracks mutual funds.

"It is looking as though any gains that you have gotten in the first half of the year have been completely wiped out," said Melissa Daly, a Lipper spokeswoman.

The damage is widespread.

Small-cap funds are down 24.25 percent in the quarter, and they have fallen more than 19 percent this year. Growth funds have slipped 16.21 percent in the quarter and 3.49 percent this year. Investors in Latin American funds have been punished with returns down 42.22 percent in the quarter and 63.51 percent for the year.

"It is hard being an investor these days," said Steven Norwitz, a spokesman at T. Rowe Price Associates Inc., a Baltimore-based mutual fund company. "Tough times."

Douglas Fabian, who tracks mutual funds and is the publisher of Fabian Investment Resources, a Huntington Beach, Calif.-based

investment advisory newsletter service, expects investors to go through "a level of shock."

But he doesn't see them panicking because of one poor quarter.

"The mutual fund industry has done a great job of teaching investors that they need to buy and hold on for the long term," Fabian said.

"There will be disappointment but I do not believe they are going to consider redemptions."

He expects investors to pay closer attention to who is managing their funds and how their money is invested.

"They are going to be asking more questions," he said.

Such losses are new to many investors who have recently gotten into the market and have experienced nothing but success.

The experts are advising them to keep faith in stocks because

over time they have outperformed bonds and Treasury bills.

"Even if you had a flat year this year, I don't think it is a disaster or a reason to disrupt your long-term investment program," Norwitz said.

"It is very unsettling to see the kind of market volatility that we have had, but investors who are investing for long-term goals are probably still going to be well-served to maintain their equity position and not overreact to the short-term developments."

But Norwitz knows how nerve-racking investing can be. He is saving for his retirement and for his daughter's college education.

Months before the market began gyrating in August, he took some money out of stocks and put it into bonds and cash.

"We were coming off three good years. I just thought, 'How much better is it going to be,' " he said.

Norwitz typically doesn't change the mix of his portfolio, he follows a consistent investment strategy.

"I don't think it makes much sense to try to outsmart the market," he said.

Daly, also an investor, has suffered, too.

She recently invested in a small-cap mutual fund, only to see it sink. And she has been reluctant to open her monthly mutual fund statement.

"I know it's there, but it is like when you were a kid and you just didn't want to open up your report card," she said.

Pub Date: 9/20/98

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