THURSDAY JANUARY 18,1979

The Herald

PAGE 13

INFLATION INVESTING

provided by Alfred F. Bracher, Jr. and Thomson McKinnon Securities, Inc. Member of the New York Stock Exchange The mutual fund industry easily one of the more dynamic segments of the securities arena, probably comes in for more praise and more criticism than any other single investment category. It may, in fact, deserve

both.

A highly critical friend of ours holds the view that investment companies are formed only as an excuse to get someone, else’s money under management and, by so doing, earn a fee -

irrespective of the results.

If that criticism sounds unduly harsh we should quickly point out that this cynical friend of ours makes the same observation about the insurance and banking industries - with no

greater claim to validity.

Such criticism notwithstanding, the Investment Company Institute has just reported that 1978 witnessed the highest net cash inflow ever

into mutual funds. Clearly the industry must be doing something right or else Barnum grossly understated the birth rate for suckers. Specifically, the gain of sales over redemptions was $5.2 billion, up from a previous record of $3.1 billion set in 1969, and a gargantuan leap over the net inflow of $780 million in 1977. Total assets of all funds at the end of November, 1978 were $53.8 billion, 10.3 percent higher than a year earlier. Such numbers do not come under the heading of small potatoes. We editors and authors of INFLATION INVESTING usually find ourselves on very neutral ground when we talk about investment companies. Historically, looking back over our considerable number of years in the investment business, we've stuck to the view that the private investor can usually do pretty well on his own IF he takes a little time and puts forth a modicum of effort. But the fact remains that man investors don't take the time - often because they can't spare it - and don't make the effort - for whatever reasons. For them be they large investors or small, investment companies make a lot of sense, perhaps more sense than any other investment alternative around today. What do investment companies deliver to the individual investor? Just about everything as a matter of fact, For openers, we'd elevate professional investment management to the top rung on the ladder of importance. Though investment managers are hardly infallible, nevertheless, they are carefully trained and schooled in security analysis and money management. Their portfolio results, therefore, are generally good - almost always better than their untrained peers.Secondly, mutual funds are available in varieties to accommodate any investment objective. The conservative investor can buy bond funds. Those who need income can find many funds that emphasize this objective. The capital appreciation oriented investor

has many growth funds to choose from. As we have pointed out in other columns, the newest and hottest product is the money fund which today boasts annual rates of return in the ten percent ballpark - and,

as of this writing, headed higher.

For those with mixed objectives - or who otherwise like to straddle the investment fence - balanced funds (portfolios with both stocks and bonds) are stacked high on the investment company shelf. Many mutual funds generate income on a monthly basis, others quarterly. All offer convenient automatic reinvestment of dividends if the investor so chooses. As if all this isn't enough, the mutual fund management companies allow their investor clients to move from one fund to another - as their objectives change or their moods shift gears. The cost to

move from one fund to another - in the same family of funds, of course - is nominal, usually five

bucks or less.

With all this variety, all this diversification, all this convenience, and all this professionalism, who could possibly have the audacity to criticize such a noble institution? The sources we’re not sure of, nor can we account

for the numbers, but criticism

does abound and sometimes it is

very vocal.

High on the complaint list is the “load,” or charge, to buy a mutual fund. Some fund management companies charge

commission rates of 8.5 percent. Tha works out to be 9.3 percent

of the amount invested, healthy whack by any stretch of the imagination. To respond to such criticism many funds

introduced "breakpoints" which are discounts for larger investments. Breakpoints start as low as $5,000 in some cases. Others have special offering periods with lower commission rates. Some have just plain lowered their rates to accommodate investors. And virtually none level any charge whatsoever when funds are

liquidated.

Another basic complaint is

that funds promise more than they deliver. They claim that the funds are sold aggressively, that the salesman's promise often exceeds the investment manager's performance. Such a cplaint in our judgement comes

from the land of sour grapes. Almost all successful businessess have aggressive selling organizations, or they don't stay in business very long. But most businesses are not as tightly regulated (by the Securities and Exchange Commission, who else!) as investment companies are and have to sell from a prospectus, a full disclosure novelette that exposes every nook and cranny of the fund and its management

organization.

So, in our judgement here at INFLATION INVESTING headquarters, the good about the mutual fund industry far exceeds the bad. The industry richly deserves the sprawling monolithic size its funds have

achieved. It fulfills a basic economic function that clearly justifies its existence, its growth, and its success. It performs for many investors that which they cannot do for themselves. That, in our opinion, is worth paying for. VILLAS CIVIC CLUB The Villas Civic Club will hold their regular monthly meeting on Sat., Jan. 20th at 1 P.M. at the Millman Center, on Bayshore Rd. in the Villas. AVALON RECREATION BRIDGE TALLY Marie Dunne, 4550; Margaret Johnson, 4460; Ruth Conroy, 4290.

[photo] John L. Armour (right), President of Sturdy Savings & Loan, congratulates Robert J. Boyer, who was named treasurer at the Association's annual meeting held this month. Also pictured after receiving promotions are Brian Garrett (left), head teller in Sturdy's Avalon branch office, and Joanne Gray, mortgage officer in Stone Harbor.

STUDY SAVINGS AND LOAN ASSOCIATION

Stone Harbor 94th St. & 3rd Ave. Avalon 2628 Dune Dr. Dennisville Rt. 47 & Woodbine Rd. STATEMENT OF CONDITION DECEMBER 31, 1978 ASSETS

First Mortgage Loans $45,489,318. Savings Account Loans 741,723. Home Improvement Loans 61,992. Loans for Educational Purposes 140,201. Buildings and Equipment (minus depreciation) 475,819. Prepayments to Federal Savings and Loan Insurance Corporation 86,672. Deferred Charges and Other Assets 447,893. Cash and Securities 7,286,363. TOTAL ASSETS $54,729,981. LIABILITIES Savings Accounts $47,239,524. Federal Home Loan Bank Advances and Other Borrowings 3,358,611. Loans in Process 83,500. Other Liabilities 234,930. Specific Reserves 1,500. General Reserves and Surplus 3,811,916. TOTAL LIABILITIES $54,729,981.

SERVICES • Passbook Savings • Savings Certificates • Home Loans • Home Improvement Loans • Individual Retirement Accounts • Education Loans • Christmas Club • Money Orders • Traveller’s Checks • Safe Deposit Boxes • Save-by-Mail • Drive-Up Teller Station • Free Parking

OFFICERS Ellis A. Mixner. Chairman of the Board John L. Armour, President Fred A. Houston, 1st V.P. & Secretary Richard D. Rodgers, 2nd V.P. John M. Ludlam, Conveyancer Donald A. Gaver, Attorney DIRECTORS Elwood M. Barron Carl R. Gratz Clarence D. Fisher George T. Harris Marshall M. Fisher John M. Ludlam Donald A. Gaver John H. Mead Ellis A. Mixner

MEMBER Federal Savings and Loan Insurance Corporation Federal Home Loan Bank New Jersey Savings League United States Savings and Loan League

STURDY’S SAVINGS PLANS

Annual Rate

Annual Yield when compounded quarterly

5.25%

REGULAR PASSBOOK

5.35%

5.75%

3 MONTH/$1,000 min. *

5.88%

6.50%

1 YEAR/$1,000 min

6.66%

6.75%

2% YRS./$1,000 min *

6.92%

7.50%

4 YRS./$1,000 min. *

7.71%

7.75%

6 YRS./$1,000 min*

7.98%

8.00%

8 YRS./$1,000 min. *

8.24%

*SUBSTANTIAL INTEREST PENALTY FOR EARLY CERTIFICATE WITHDRAWAL