MUTUAL FUND LESSON FOUR As promised here are the answers to the questions about mutual funds featured in last weeks Moneywise column. We are showing the fund fact sheet again, so that you can follow along.

*** NO NAME GROWTH AND INCOME MUTUAL FUND 1. How long has this fund been in operation? Since 1924-1998, in existence for 74 years, older than most of us. A truly astonishing performance.

2. What has been its track record? Since inception, it has returned an average 10.09 percent. That includes the very bad years of the 1929 stock market crash, and the terrible depression that followed. Many investments that lost money in those years took almost twenty years to recover; this fund had its greatest gain three years after the crash.

3. In good investment years? Take a look at the last fifteen. It is not a high-tech flyer, but the trend is slow and steady upwards. It has had 53 positive return years, the best one-year of 99.76 percent in 1933.

4. In bad investment years? It is just as important a rating. 1990, 1994 and 1998 were not the best years in the market, yet this fund held its own, not even giving up the gains of the prior years.

5. In the bad years, how much did it lose and how long did it take to recover to the NAV just before the down cycle? Figure 21 down cycles to 53 up cycles.

6. What does NAV stand for? Net asset value price. How is it computed? NAV per share equals the total assets of the fund divided by the outstanding shares minus the liabilities. The price of the shares rise and fall every day with the total value of the securities in the fund's portfolio.

Is it the same as the rate of return or the yield on the fund? There are three ways to track a fund's performance: (1) follow its share price (NAV); (2) track its yield which is the amount of income it pays out; or (3) look at its total return, which takes share price changes and adds in reinvested income, dividends (plus capital gains or minus capital losses after expenses).

7. Explain load adjusted. This is a front-end loaded fund with a sales commission of 5.75 percent, meaning that $1,000 buying into the fund is really net of the commission; $942.50 actually gets invested. Securities regulatory rules on disclosure state that you must show the real rate of return when the commission is deducted up front, as you can see it takes quite a few years to catch up.

8. What kind of a fund is this? It is a growth and income fund; the stocks in the fund are picked for long-term appreciation in value and because the companies pay a consistent dividend. This type of fund is suitable for someone who may need income every month.

9. Explain why I only see the top ten stock positions in the fund. At present, that is all that securities disclosure rules require on a fact sheet. The fund's annual report must disclosure the amount of every stock position held at that time of release.

10. Why is there a cash position of five percent? See the fund description. I thought the fund invested in stocks? They do, but depending upon market conditions, managers may hold cash "on the sidelines'' waiting for a downward slide to step in and buy under valued stock. That's right, a down market can be a buying opportunity, not the time to panic and sell.

11. Explain the different sector weightings. Sector weighting is one method of diversification that is spreading out the risk of investing among differences segments of industries. Are they always the same for this fund? Not necessarily, depends upon market conditions. How can I tell which stocks belong where? You can see much of this information in the annual report, but this requires research. You cannot get this information from one fact sheet.

12. What are these MPT Statistics? Can you explain them to me? 13. What is standard deviation, Alpha, Beta, R-squared, Sharpe and Traynor? This looks like some sort of math I hated in grammar school. Why do I need to know this? 14. I don't really understand these types of math concepts, how do you use these for reviewing mutual funds? These items (12, 13 and 14) will be discussed by themselves in a future article in the next six weeks. Simply put, they all relate to risk values in this fund relative to risk incurred by its peer group and to the market.

15. Explain Net Assets. The net asset value per share as of November 30, 1998, is $20.17 16. Explain turnover? This is number of times in a year (expressed in percentage) that the fund manager buys and sells stocks in the portfolio. Why would I care about that? It is an indication of stability, the manager's style, is he/she buying and holding, or just racing around trying to push the total return up. Constant turnover adds to the cost, and may be a big indicator of risky investments. As advisors, we care about this statistic.

17. What are the admin fees? Total expense ratio (admin) is the cost of running the fund itself. It is not a commission or sales charge. Do they get deducted from my investment, too? Yes, it affects the total return. This fund is well managed with low fees, but some funds can run as high as two to three percent annually. What about the commission? That is a separate charge paid by the Fund Company to a brokerage firm, What are you getting paid out of this? A financial advisor will only receive part of the $57.50 per $1,000. The advisor's commission can range anywhere from 35 percent to 60 percent of the 5.75 percent charge; the rest goes to the brokerage firm.

18. If it isn't the top performer, why are you picking it for me? Consistency, stability, and reliability over the long-term. The cardinal rule is the greater the return, the greater the risk. Another whole subject in itself.

19. How many fees are there, this says the fund has a front-end sales charge? See above.

20. According to this fee schedule (which is not shown), if I only invest a little, my sales charge is almost three times as much as someone who invests a million dollars? Why is this, it does not seem fair? I have to work harder for my money. It costs just as much to process a sale for $1,000 as it does for a million. The fund grows quicker, obviously, at a million each sale and gives the fund manager the ability to practice economies of scale. Thus, a larger sale receives a price break. That's life.

*** Reference sites on the Web: Smartmoney.com, money.com, msn.com, yahoo.com, thefool.com.

Any well known fund company has a website also -- fidelity, invesco, vanguard, fidelity, etcetera.

*** For books: Check the finance section of any book store or Amazon.com. A good starter book is `Investing for Dummies'.

*** Readers, this ends lesson 4. More to come, but interspersed with other topics.

*** Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Readers needing specific assistance should seek advice from an experienced professional financial advisor.

*** Martha Harris Myron CPA CFP, is a Bermudian, a Certified Financial Planner, holds NASD S 7 and has a US tax background. She is the programme director for the Financial Planning Association of Bermuda. Questions regarding this article may be sent to e-mail: marthamyron(at)northrock.bm