From: McAldon International Inc. <mcaldon@igc.org>
Newsgroups: misc.invest
Date: 30 Jul 92 19:34 PDT
Subject: fund stuff
Nf-ID: #N:cdp:1426500228:000:5303
Nf-From: cdp.UUCP!mcaldon    Jul 30 19:34:00 1992


Message 6 (112 lines)
From dnadler@ncrsoph.sophia.NCR.COM Thu Jul 30 05:06:57 1992
To: mcaldon@igc.org
Subject: Posting an article for me.
Newsgroups: misc.invest
Organization: NCR European Development Center
Cc: 
Date: Thu, 30 Jul 92 13:57:00 GMT
From: dnadler@ncrsoph.sophia.NCR.COM

I'd like to ask a favor.  If you could, would you please post this article
to misc.invest.  For some reason, I can receive the group at my site, but
cannot post to it.  I have included the article below, after the ****** line.

If you prefer not to post the article, can you please let me know so I can
ask someone else.  Thanks a lot.

***************************************************************************

this is a message from a mutual fund semi-annual report.  So as to not seem
as if I'm trying to suggest the fund, I'm leaving out the name.  However,
I thought the message itself would be interesting for all the beginning
investors who haunt this newsgroup in search of "easy money".

Dear Shareholder:

As you may recall, 1991 was a year of declining interest rates.  The discount
rate - a key measure of short-term rates - fell to its lowest level in 28
years.  Rates on six-month certificates of deposit dropped from about 7% in
December 1990 to around 4% in December 1991.  Not suprisingly, yields on
money market funds also fell to new lows.

In search of higher income, many people moved into bond funds - some for the
first time.  Last year, this strategy paid off handsomely.  For example, in
1991 the average government securities fund had a return of 14.5%, while the
average general municipal bond fund had a return of 11.92%, according to
Lipper Analytical Services.

But bond funds are different from federally insured, fixed-rate CDs; fixed-
price money market funds; and other more stable investments.  Along with their
higher income potential come added risks that can affect your share proce. 
The most common risks with bonds are:

- Credit risk or the chance that the issuer of the bond will not be able to
  make its scheduled interest or principal payments; and

- Interest rate risk or the likelihood that interest rates will rise, causing
  bond prices to fall.

A bond fund, because it is a diversified and professionally managed portfolio,
is designed to reduce much of your credit risk.  At &#%#@#$, for example, we
have 23 analysts researching the creditworthiness of bonds worldwide.  Each
bond has to pass our rigorous analysis before we'll buy it.  Of course,
different bond funds take on varying degress of credit risk.  If you want to
reduce credit risk to the minimum, you can invest in funds that own only U.S.
government bonds.  Assuming interest rates stay the same, higher quality
should make the fund's share price more stable.

Equally critical is interest rate risk.  If you own a bond fund, you can expect

your share price to fall as interest rates rise (and rise as interest rates
fall).  How much your share price falls when interest rates rise usually
depends on the fund.  Generally, the shorter a fund's maturity, the less its
share price will fall.

Credit risk and interest rate risk together can affect share price in different

ways depending on the type of bonds a fund owns.  For example, the prices of
government bonds and highly rated corporate and municipal bonds will usually
move up and down with changes in interest rates.  But the proces of lower
quality bonds will usually fluctuate with both changes in interest rates and
changes in perceptions about credit quality.  So, when interest rates are
rising, corporate and municipal bonds with improving credit quality may do
better than government bonds.  Conversely, when interest rates are falling and
the economy is weakening, corporate and municipal bonds may lag government
bonds.

While it is not our intestion to predict the direction of the bond market, we
would like to point out that historically when the economy heats up, inflation
and interest rates rise.  It's important that bonds fund shareholders under-
stand both the risks of their income investments and how to manage them.  You
can manage risk in several ways.

- To start, keep your emergency cash or money you plan to use in the near
  term in a stable investment like a money market fund.  This should help you
  have the full amount available if and when you need it.

- Then, choose funds that match your needs.  For example, consider funds with
  shorter-term maturities for money you'll be using in one to five years, funds

  with longer-term maturities for assets you won't be tapping for some time.
  If you're not comfortable with sharp changes in your share price, choose a
  short-term bond fund over a longer-term one.

It's easy to choose a fund based on its income potential.  But to increase
your income potential, you also have to take on added risks.  These investment
principles can help you balance income and risk considerations.  We hope you
find them useful.  If we can help with your investments, please call us at
1-800-###-####.

Best regards,

#^*@^&@%* $ &#%@$^!%#@$^

President.
-- 
Dave.Nadler@ncrsoph.Sophia.NCR.COM
Europe Group ISS, NCR Europe, Sophia-Antipolis, France
"I know I can't change the world overnight.  It'll take a couple of weeks."