Mutual Funds Let Pros Do the Heavy Lifting

TALK radio has been profitable for Shawn Splane. And, so have mutual funds, where some of his broadcast earnings have been invested.

Mr. Splane is a talk show producer at radio station KING-AM in Seattle. He began investing five years ago, in April 1990.

Through carefully managing their finances, Splane and his wife have acquired a nest egg invested in 12 mutual funds.

When Splane initially began setting aside money in the early 1990s, he thought of buying individual shares of stock. But he quickly realized that given the demands on his schedule, it was better to leave the selection of financial instruments such as equities to professional money managers. And Splane wanted broad diversification among different types of investments.

''With a degree in economics from the University of Washington, I can crunch numbers about as well as anyone,'' he says. ''But what makes mutual funds so attractive is that one doesn't need to do that.'' Each mutual fund, Splane notes, is supervised by an investment manager. The investment manager can spend the hundreds of hours necessary to study up on and select the large number of stocks or bonds that will make up the fund, and that, hopefully, should post earnings growth over time.

All Splane's mutual-fund expertise ''is self taught,'' through reading books and magazines, he says. But Splane couldn't be more pleased. His funds have beaten the Standard & Poor's 500 index every year except 1994, when stock prices slumped. Last year the S & P 500 posted a total return of plus 1.31 percent. Splane's mutual funds were down 2.2 percent. But he wasn't alone. US stock funds were down 1.69 percent last year.

But 1995, Splane says, should be better. He expects his funds to equal, or exceed, national market indexes.

During the past 10 years, equity funds posted an average annual return of around 13 percent. Whether that pace will continue is a wide-open question.

''For the next few years, investors are going to have to lower their expectations regarding total returns on investments,'' says Sheryl Durham, bond portfolio manager at Glenmede Trust Company, Philadelphia, a private investment bank.

''The downturn that a lot of funds ran into last year may not be over,'' says Gregory Dorsey, editor of ''Wall Street Bargains,'' a monthly stock market newsletter published in Alexandria, Va.

Still, Mr. Dorsey believes that mutual funds should beat alternative investments over the long term. His recommendation: Individuals should buy shares of ''at least five or six funds,'' if they can afford it.

A ''mutual fund'' is an investment company that pools money from various shareholders and buys a diverse portfolio of financial instruments such as stocks or bonds. The fund will ''redeem,'' or buy back, your shares at their ''net asset value,'' based on the market value of the fund's securities at the time of redemption.

''Currently, we list some 5,375 mutual funds, with a total asset value of around $2.2 trillion,'' says Malin Jennings, a spokeswoman for the Washington-based Investment Company Institute (ICI). The ICI is the trade arm for the mutual fund industry.

Mutual funds have exploded in popularity during the past decade. In 1980, says Ms. Jennings, there were only 564 funds, with an asset value of $135 billion.

There are two main types of mutual fund:

*''Open-end'' funds. These allow an unlimited number of investors. Many of the largest and best-known funds are open-end funds.

*''Closed-end'' funds. They generally have a set number of shares, which can be bought and sold. These can be traded like individual stocks.

Mutual fund assets encompass diverse kinds of financial instruments, including stocks (equities), fixed instruments (bonds), and money-market accounts.

Your mutual funds mix will likely depend on your age, risk parameters, and personal investment goals.

You can purchase mutual funds in a number of ways: through company investment plans; by contacting the fund directly; or through an intermediary, such as a broker or a bank. Going through an intermediary is more expensive, since you usually will pay a sales charge. Funds with a sales charge are known as load funds.

Most experts suggest you buy funds directly from a mutual fund company that requires only a modest sales charge, paid when shares are initially purchased (known as a low-load fund), or that charges no fees at all (a no-load fund).

A good approach: Buy from a company with a ''family'' of funds, such as Fidelity Investments or T. Rowe Price. That allows you to shift assets back and forth between different types of funds as economic conditions change.

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