European Stars and Stripes (Newspaper) - February 26, 1992, Darmstadt, Hesse                                Page 18 the stars and stripes wednesday february 26,1992 Money matter sin the Market for higher returns unwary investors need to know Pitfalls by Harry Berkowitz and Jerry Morgan new Day new York a for years Carol Giles was perfectly Happy keeping her extra Money in certificates of Deposit figuring the Low risk made up for middling returns. Then last year the collapse of interest rates transformed the new York resident from a contented Saver into an eager investor. A i was coerced by the depressing results of the cd rates a said Giles a 40-year old divorced Mother of two boys. She transferred her savings last month to a Mutual fund at Fidelity investments that shifts Money among stocks Bonds and Cash. A i think in be done the right thing because i knew i had to get More adventuresome in my thinking toward investments. But there is always a concern that everything will go belly up and my investment will shrink even worse than the cd  the metamorphosis of millions of savers such As Giles a lured in part by soaring Mutual fund returns last year a reflects a dramatic change in the Way Many americans Are trying to make their savings grow. In reaction Mutual fund Sellers Are scrambling to find new and better ways to compete for the Money but avoid being overwhelmed by the flood of Cash. At the same time the companies Are increasingly worried that naive a and possibly fickle a investors have Little sense of the risks involved. A you have people chasing for yield at this time a said Michael upper president of upper analytical securities corp., based in Summit . A this is the forced conversion of savers to investors and i Don t think they have teamed the new rules of the  last year As interest rates plunged below 4 percent for cd the average return was 30.69 percent for Stock funds and 18.13 percent for Bond funds according to Lipper. That helped pull $106 billion of new Money into Stock and Bond funds in 1991, compared with $22 billion the year before according to the investment company Institute the Industry Trade group based in Washington . But unlike certificates of Deposit whose principal is insured Mutual fund investors can lose Money if Stock or Bond prices plunge or crash As the Stock Market did in 1987, especially if they panic and pull out their Money before markets recover. Also different funds produce wildly different returns and even in Good Overall years for stocks some funds lose Money. Mutual fund companies As Well As brokerage firms Banks and insurance companies Are Rushing to add the latest in fancy computer and 24-hour phone services Tower or a Jigger fees rework ads brochures and account statements and train extra people to answer questions and handle transactions involving Mutual funds. One company Janus funds in Denver even added a Langer of the proliferation is of confusing Popio to the Point they come paralysed and can to Steven Norwitz spokesman for to Rowe Price 900 number with a $2 charge per Call to handle the overload of Calls from customers and potential customers when the regular 800 number gets tied up. Companies vying for Market share have multiplied their offerings exponentially. The number of individual Stock and Bond funds totalling More than 2,600, has nearly doubled since 1986. There Are also More than 800 Money Market funds. The variety of funds includes those that invest in one country such As Japan or a Region in one Industry or in firms deemed socially responsible. A the danger of the proliferation is of confusing people to the Point they become paralysed and can to act a said Steven Norwitz spokesman for t. Rowe Price a Baltimore Mutual fund company that has gone from six funds in 1980 to 39 today. In some cases Novice investors in search of High yields end up More confused and disappointed than enlightened especially if they run into poorly trained or Over zealous sales representatives experts say. A what they have to realize is that when you get 7 or 8 percent there is double the risk for double the yield a said Kurt Brouwer author of a guide to Mutual funds. But even As investors pour in some Mutual fund companies Are running enticing ads boasting of dazzling past performance. _ a funds Are turning up the flame under the promotion fire and that does no to make a lot of sense when people Are beating a path to your door Quot said John j. Brennan president of Vanguard group in Valley forge a. The Vanguard group is the third biggest seller of Stock and Bond Mutual funds. In november the National association of securities dealers cautioned members to inform cd holders of the risks of switching to Bond funds. Failure to do so the notification said would expose members Quot to the complaints of disgruntled customers who May claim they were never told their invested capital could fluctuate in  but Many investors Are Blind to such warnings. A people see returns of More than 100 percent for last year and they say a Good lord liquidate the cd Honey a a said Michelle a. Smith managing director of the Mutual fund education Alliance in Kansas City mo., an organization of 22 Mutual fund companies. A people done to understand Market cycles and the concept of what goes up must come  particularly vulnerable Are retirees who depend upon interest income and switch their investments to Mutual funds. Unlike younger people retirees cannot replace the principal they might lose from a Market decline. Not everyone of course is closing savings accounts. While assets in Stock and Bond funds totalled $807 billion at years end such investments Are still substantially less than the $2.6 trillion in cd and Low paying savings accounts. Nevertheless As Novice investors flock to Mutual funds some Industry officials fear that investment disappointments will drive potential Long term customers away. A if you mislead people on what you Are Selling and go out and get a ton of assets it is going to go right out the door again because you Haven to sold it right a said Charles Mohr president of Sun America a Mutual fund company based in new York. Fidelity the biggest Mutual fund seller is revamping its training of service representatives to focus More on investor goals needs and background before discussing which investments might be right said spokesman Rab Bertel sen. Last year the Boston based company changed the language in its newsletters to eighth or ninth Grade level Down from 11th Grade and above before. But Vanguard takes the opposite View. A we done to want to give advice because we done to know your entire financial picture a Brennan said. Even sophisticated investors Are searching for help in sorting through All the funds. Subscribers to the no Load fund investor a $95-a-year newsletter jumped More than 50 percent last year to 20,000, said Sheldon Jacobs the publisher. Adding to confusion among investors Many Mutual funds also have altered the Way they charge fees. A there is now a fairly bewildering array of fees that investment companies charge a said Marianne k. Smythe director of the division of investment management at the securities and Exchange commission. At some companies annual operating expenses Knock As much As 2.5 percent off returns. Others charge hefty sales commissions or a a loads of up to 8.5 percent. Competition for customers has had some effect on costs. But while there has been a lowering of front end loads in recent years Quot there Isnit much evidence there has been a lowering of the Overall level of fees a smythe said. Brennan at Vanguard decries such tactics. A any Short term opportunistic sales practice that misleads the Public can Hurt us in the Long term a he  fretting More about Money poll finds new York apr nearly four in 10 americans feel worse off financially under the Bush administration and most think about Money More often than sex Money Magazine said in an annual poll. Other findings show americans Are increasingly worried about the safety of Banks and will remain frugal regardless of when the economic slump ends. One in five worries that the hard times Mark the beginning of a depression. A people sense that they re running Uphill Quot Frank Lalli managing editor of the personal finance monthly told a news conference. A the gloom has deepened. There a something deeply disturbing going on out  the results of the seventh annual a americans amp their Money Quot poll reflected a higher level of anxiety than the magazines previous surveys which began after the last recession in 1981 and 1982. The latest poll is based on two separate surveys conducted last summer and fall. The findings seemed to substantiate other evidence that americans Are becoming increasingly alarmed that their living standards Are eroding because of an economic decline now in its 18th month by some measures. Thirty seven percent said their personal finances have worsened under president Bush while Only 5 percent think his policies have made their finances better. Only 9 percent of Republican respondents said they Felt better off under Bush. Twenty two percent said the Economy is in the Early stage of a depression. While an equal number said they thought a recovery was under Way 55 percent characterized the situation As a recession. In response to the question a which do you think about More often. Money or sex a 76 percent said Money. Of these 85 percent of female respondents said Money while 70 percent of male respondents said Money. Among other findings a when asked what they would do with a $10,000 Windfall 60 percent of respondents said they would save the Money or use it to pay off debt. Less then 1 percent said they would splurge on themselves. A four in 10 respondents said they have Little or no Faith in the . Banking system scarred by More than 120 failures last year. Twenty seven percent said news about troubled Banks had made them less Likely to keep their Money in one. A thirty percent said they would continue to spend less after the downturn ends. Even among respondents with incomes exceeding $100,000, Only 16 percent anticipated spending More once a recovery emerges. A asked what they would have done differently with their Money during the booming 1980s, 51 percent said they would have borrowed less two thirds said they would have saved More and 54 percent said they would have invested More a americans Are ready to save. They re predisposed to do it a said Tyler Mathi sen assisting managing editor of the Magazine. A the pendulum has swung  Teresa Tritch the magazines tax writer who helped work on the poll said some of the contrasts Between the latest results and years earlier Are striking. In the 1986 poll for example Only 39 percent of respondents said unemployment would Rise Over the following 12 months. In the latest poll 55 percent foresaw a Rise. The surveys used to compile the results were conducted for the Magazine by Willard amp Shullman a Greenwich conn.,the results of a poll by Money Magazine reflected a  of anxiety about the state of the Economy under the Bush administration. A Early stage of depression in a g 1 1 v 1 recovery a May not add up to Sqq due to margin of error aps amps research firm. The first Survey completed in August queried 1,855 randomly selected adults by mail As Well As 841 Money subscribers. The second Survey was a follow up Telephone poll of 1,000 adults completed in october. The margin of error for the mail Survey was 2 percentage Points for the Telephone poll it was 3 percentage Points. Money a publication of time Warner inc., carries the results in its March Issue