Where to get the scoop on new mutual funds
BOSTON — Q. i would like to invest in a mutual fund that has been around for about a year. But I can't find any listing of it in newspapers, or in the written reports by Morningstar. How do you evaluate new funds?
A. Information firms such as Morningstar, Lipper, and Value Line often carry information on new funds on their Web sites or on CD-ROM, says Lawrence Solomon, research director of the No-Load Fund Investor, in Irvington, New York.
"If the fund is very new, find out all you can about the management company, its past work and the new fund's current objectives," Mr. Solomon says.
Usually a fund company will be cooperative, since it wants your business. If it's not, "that should be a warning flag," he says.
Q. I read that [investment house] Goldman Sachs recently "went public," and can be traded on the New York Stock Exchange. Can you directly invest in mutual-fund companies, the way you can in some brokerage houses? I like Janus, Berger, Fidelity, Schwab, and Vanguard.
C.M., Long Island City, N.Y.
A. Some mutual-fund companies are publicly held and can be invested in, including Janus and Berger (both owned by Kansas City Southern Industries), Franklin Group, Dreyfus (owned by Mellon Bank), and Schwab, which is actually a discount brokerage. But many fund groups are privately held companies, including Fidelity and Vanguard.
Q. In measuring the potential of a stock, what is the difference between a company's "return on equity," and "earnings per share?" Where can I find them listed?
A. Return on equity (ROE) shows how efficiently a company uses its capital. Statisticians find ROE by dividing a company's earnings per share by its "book value," which is its net worth, minus all debts. The higher the ROE figure, the better the stock.
Earnings per share (EPS) is calculated by dividing a firm's quarterly net income by the average number of common shares outstanding. It shows you what each share of stock "earned" for that period. If EPS increases each year, the company is growing.
Stock reports issued by brokerage houses usually carry the two numbers. The Investor's Business Daily has a special rating for the ROE and EPS of companies in its stock listings.
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