Newsletters let investors keep tabs on a major array of funds
Boston — APPLE Computer has several. So does International Business Machines. Why should't a mutual fund company have a few, too? Like Apple and IBM, Fidelity Investments of Boston is watching several outsiders make money publishing newsletters solely about its menu of mutual funds.
Even though Fidelity has had a large fund selection for several years, the need for close monitoring of its funds really got started when the company introduced its sector funds, called Select Portfolios. With these funds, which are almost always volatile and can be risky, an investor can put money in the general Select Portfolio category and move all or part of that money among various industry groups, such as automotive stocks, biotechnology, computers, defense, leisure, or regional banks. With a telephone call, they can switch all or part of that money among the various sectors.
Although a few other mutual-fund sponsors have a sector fund, Fidelity's is the largest, covering some 35 industries.
With that many sectors, plus the normal selection of income, growth, aggressive growth, bond, and money market funds, more than 70 funds in all, there's a lot to watch at Fidelity.
And there are getting to be a lot of watchers. At present, there are at least three newsletters whose only purpose is to keep a full-time watch on Fidelity: Insight, published in Needham, Mass.; O'Malley's Fidelity Watch, of Ellisville, Mo.; and Margo's Market Monitor, of Lexington, Mass.
Insight started late last year, when Eric M. Kobren left his job as marketing director at Fidelity to start the Mutual Fund Investors Association and publish the monthly newsletter. While the name sounds broad enough, the only purpose of the group and the newsletter is to follow Fidelity.
Mr. Kobren's decision to start the newsletter grew out of a major frustration he had working at Fidelity. The frustration wan't Fidelity's fault; it was a legal roadblock.
``As marketing director, I would often listen in on phone calls from investors,'' he recalls. ``At the end of the call, they'd often ask, `Can you recommend a fund?'''
The only thing a phone representative could do, he says, was to get a general idea of what funds might suit the caller and send a few prospectuses.
Kobren says his newsletter tries to be as much an educational tool as a guide to which funds have the best prospects for investors. ``I try to explain things to people in a way they'll understand,'' he says. ``I might say here is the difference between Puritan and all equity-income funds, or here's the difference between a growth-and-income and a balanced fund.''
The association has over 20,000 members, Kobren says. Membership, which includes the newsletter, costs $95 a year, but a six-month trial is available for $34. The phone number is 800-343-4300.
Unlike Kobren, John O'Malley, publisher of O'Malley's Fidelity Watch, does not have a background in the mutual fund or investment business. He is president of a business form company and wanted to invest with Fidelity to simplify his personal investments.
Like many other investors, however, Mr. O'Malley found the range of choices at Fidelity somewhat daunting. That's when he began spending time at his computer terminal, developing a system to develop and update a portfolio of Fidelity funds that outperfom the Standard & Poor's 500.
Unlike Kobren's Insight, O'Malley's Fidelity Watch does not offer articles on the various funds. It offers statistics on the growth, income, bond, money matket, and sector funds. The letter presents a model portfolio of non-sector funds as well as a portfolio of sector funds.
``We try to do as good or better than the market by switching among Fidelity funds according to a mathematical model,'' O'Malley says. ``The model is based on the price history of all the funds we've monitored over the last 21 months.''
O'Malley says he has about 1,200 subscribers so far. The letter is available on a weekly basis for $312, or monthly for $108. A six-month trial is also available for $36. The telephone: 800-345-3863.
Both Kobren and O'Malley say they get no special help from Fidelity, nor does the company do anything to hinder them. ``I think I'm treated like any journalist,'' Kobren says.
``We look at [the letters] as the inevitable consequence of success,'' Fidelity spokesman Rab Bertelsen says modestly. ``The same thing happened to IBM when they became the standard in the computer industry. But it is a little uncomfortable to be followed and examined so closely.
``It technically is an advantage to Fidelity, though,'' Mr. Bertelsen continued. ``They provide a tool to people who have experience with Fidelity's funds.''
That logic is even prompting Fidelity to provide a tool of its own. Last month, it introduced Investment Vision, a magazine of investing and saving ideas, news about tax changes, and profiles of investors.
The magazine also suggests possible portfolios for different types of people, including portfolios for capital preservation, retirement savings, and growth. It will be sent monthly to Fidelity investors, Bertelsen said.
Fidelity may be the first mutual fund company to have several newsletters giving it full-time observation, but it probably won't be the last. In a few months, Kobren says, he hopes to offer a newsletter for investors in another major fund company, probably Vanguard.