Newsgroups: biz.americast.samples
From: americast-post@AmeriCast.Com
Organization: American Cybercasting
Subject: FUND SURVEY
Date: Sat, 29 Aug 92 14:53:54 EDT

This is an actual portion of the electronic edition of Forbes, as
distributed by American Cybercasting.  For more information, send e-mail
to usa@AmeriCast.com or write to POB 575, Aurora, OH 44202.

FUND SURVEY

Rules

FORBES rates funds separately in bull and bear markets.
There are two advantages to this approach over a simple
straight-line performance grade. One is that it makes
explicit the fact that funds tend to do well in only one kind
of market environment. The other is that it enables you to
get a good sense of the risk in a fund. Funds with the worst
bear market grades are the riskiest. This is key to an
investment decision: You trade off risk against return.
 The chart opposite displays the three market cycles over
which we rate stock funds. Funds with records stretching
across three up periods are compared with one another
and graded on the curve for bull market performance.
Funds with only two segments of bull market performance
are graded separately against one another. Bear market
grades are awarded similarly.
 Balanced, global and foreign
stock funds are also graded against
one another over market cycles, in
tables that begin on pages 152,
158 and 160. Junk bonds, page
178, have a large element of equi-
ty-like behavior in their fluctua-
tions and thus move in cycles. The
junk sector's 2 1/2 market cycles be-
gin in October 1984.
 But high-grade bonds don't
move in long trend lines at all. Thus
we compute separate bull and bear
market grades for taxable bond
funds, page 168, by dividing the last
five years into individual bull and
bear months. Municipal bond
funds, which begin on page 180, are graded this way, too.
 The ''average annual total return'' shows the com-
pound annual return over the full rating period-three full
market cycles in the case of stock funds, 2 1/2 cycles for junk
funds and five years for the other bond funds. This and
other performance figures-yield and 12-month total
return-are net of expenses taken off the top by the fund
sponsor. That's because expenses come out before divi-
dends are distributed. Those distributions are in turn used,
along with the fund net asset values printed in the daily
newspapers, to calculate performance. In the calculations
of total return we assume a distribution is reinvested in
additional shares of the fund at the end of the month in
which the payout went ex-dividend.
 Why do we print expense ratios if overhead costs are
already reflected in performance numbers? Because they
are the one component of performance that is very
predictable. A lucky manager can put his fund at the top of
a chart in spite of an excessive management fee or high
overhead. The next year he may not be so lucky. But
management fees and other expenses will continue as a
drag on performance. Expenses as we define them include
management fees, 12b-1 ''distribution'' fees and over-
head. They do not include interest or brokerage commis-
sions for the fund's trading.
 Our performance numbers-both those displayed in
the tables and those used to award grades-do not take
into account sales charges. Thus we are measuring portfo-
lio management skills rather than investment results. The
only exception is in the ''hypothetical investment results''
column of the honor roll on page 88.
 Performance and other data are as of June 30. The
performance of a closed-end fund is calculated from its
portfolio (net asset value per share), not its price.
 Sometimes a fund sponsor merges a large fund with a
bad record into a small fund with a clean record. We treat
this transaction as if the merger had gone the reverse way,
thus preserving the large fund's performance history. This
explains why our performance
numbers for several funds differ
from those claimed by the funds.
Also, we do not expunge a fund's
history when its management
changes.
 Funds marketed by many bro-
kers give investors a choice be-
tween shares with a front-end load
and little or no 12b-1 fees and
shares with a declining back-end
load and fairly high 12b-1 fees. We
report performance for the former
type of shares but assets for the
entire fund.
 Yield is the sum of dividends
from investment income over the
past 12 months divided by the June
30 net asset value. It may differ from the 30-day yield as
defined by the Securities & Exchange Commission.
 To be included in the annual survey a fund must have a
minimum investment below $250,000 and be open to the
general public. An exception to the latter rule is made for
certain widely held membership-only funds, such as those
of the American Association of Retired Persons. Exchange
funds, a dying breed that under tax laws cannot accept new
clients, are no longer covered.
 You won't find brand-new funds in this survey. A fund
must have 12 months of performance data before we add it
to our catalog. It also must reach a certain size: $25 million
for domestic equity funds or foreign funds of any type;
$100 million for bond funds and tax-free money markets;
$500 million for taxable money markets. Our roster of
money market funds is very short because it is confined to
the ones with the lowest expense ratios, for reasons
explained on page 192.
 The Forbes honor roll of stock funds that have turned in
the best and most consistent performance in the past
appears on page 88. Our recommended lists of funds with
low expenses and good returns are called Best Buys,
beginning on page 90. Phone numbers appear in the
distributor listing at the back of the survey.
This article is copyright 1992 Forbes. Redistribution to
other sites is not permitted except by arrangement with American 
Cybercasting Corporation.  For more information, send-email to 
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