You've just received a $1,000 bonus from your company for a first-rate sales presentation.
Stock prices keep going higher. Retirement beckons. You want to put the money into a mutual fund. But which one?
Well, you could ask a friend, call a broker, or do some homework and make your own informed choice.
If the latter sounds like the best approach to intelligent investing, several companies - including Morningstar in Chicago, and Value Line and in New York - offer the research muscle.
Reading their reports is "an important first step for anyone interested in mutual funds," says Reg Green, a longtime analyst of mutual funds who heads up Green Financial Communications, in California.
The services churn out detailed monthly reports, profiling thousands of funds - their managers, performance over various time periods, and rankings among peer groups.
"The services provide an enormous amount of information investors need to know if they are going to make intelligent decisions about investments," Mr. Green says.
Morningstar, for example, publishes Morningstar Mutual Funds (800-735-0700), which covers some 1,670 funds. Cost: $425 a year.
The Value Line Mutual Fund Survey (800-634-3583) tracks 1,550 funds for $295 a year.
Lipper Analytical Services of New York also publishes mutual fund reports but largely for brokers and market professionals.
Another firm, Ibbotson Associates of Chicago, also plans a fund-rating service soon, a spokeswoman says.
Morningstar rates funds with a star system: Five stars mean a fund is Numero Uno, in the top 10 percent of all funds. One star points to the bottom 10 percent of similar funds.
Value Line, by contrast, uses numbers, 1 through 5. No. 1 means exactly what it says.
But ratings "are a problem," Mr. Green says, because they only cover past performance. "Just because a fund has done well in the past does not mean it will do well in the future. You've got to look at much more information ... read widely about the funds," the market and the economy.
Both Value Line and Morningstar go a long way toward providing that level of information. They devote a full page to each of the funds covered and analyze the economic and market forces affecting the funds.
James Stack, a longtime financial analyst who publishes the InvesTech newsletter, argues that while rating services provide valuable information, they can also affect the market .
Some of the "exuberance" regarding stocks, he says, is fueled by the way the services report information.
He notes their use of "momentum measurement" to show which companies and funds are growing fastest.
Usually, momentum and high ratings march hand in hand, he says, and investors want to jump aboard.
But not all the risks are adequately detailed, he says. The services define risk by past performance, "not overvaluation levels."
Case in point: Value Line currently gives a high rating to Gillette and Coca-Cola "for their timeliness," Stack says. But the ratings ignore high valuations, he says. Prices for both stocks have risen to the highest relative levels in decades.
And that presents a risk that the rating services ignore, Stack says. But mutual fund investors need to know about that risk, he argues, since many stock funds own companies with those high valuation levels.
Still, as supporters note, the reports do provide a helpful range of material, from a fund's address and phone number to asset size and portfolio composition. The material also explains expenses and fee structures and provides a capsule review of the fund as seen by the rating analyst.
Morningstar tends to be literary, reflecting the liberal arts background of many of its analysts. Value Line tends to be more matter-of-fact, reflecting the business background of many of its analysts.
If the cost seems prohibitive, many public libraries carry the reports. There are also lower-cost alternatives: Mutual Fund magazine, with its own ratings (800-442-9000, $9.97 annually for new subscribers), ant the No-Load Fund Investor, which provides monthly information on no-load (no commission) funds ($135 annually).
Both Value Line and Morningstar provide a variety of entry points to their services - printed, monthly materials and on-line products, and each has an Internet Web site.
Morningstar's free site (www.morningstar.net) provides commentary on mutual fund investing, as well as data on specific funds.
Morningstar also offers several subscription services on CD-ROM:
* "Ascent," a monthly service designed for smaller investors, costs $195 annually.
* "Principia" is more sophisticated and tracks more than 8,000 funds. It costs $395 a year for monthly material, $195 for quarterly offerings.
* "Principia Plus" is even more sophisticated and costs $795 a year for monthly material, $495 for quarterly offerings.
Value Line also offers a free Web site (www. valueline.com) with investment information.
It's "Value Line Mutual Fund Survey" on CD-ROM costs $395 a year and covers 6,000 funds.