How To Profit From The Tables - funds

Kiplinger's Personal Finance Magazine, August, 2000

ON THE PAGES that follow is our exclusive ranking of the 1,000 biggest--and most successful--mutual funds.

Details and definitions of the criteria we use are explained below. But first, a quick tour to explain how the data can be used to your advantage.

Most people will focus their attention on the columns showing total returns for the past one, three and five years. This is important information, but perhaps not the most important. There are four other signposts of a good fund:

* Decile rank. How well did a fund do relative to similar funds or to all U.S. stock, international stock, bond or muni funds year by year over the past half decade? A mutual fund that has built its track record on just one or two above-average years may not be able to repeat the trick in the future.

* 2000 down market, Between March 10 and May 23, the Nasdaq Composite index slid 37.3% in a major correction. Funds invested heavily in technology stocks should have suffered most, and those that pursued a cautious investment path should have fallen least.

* Manager since. If a fund is attractive to you, make certain that the person responsible for that track record is still around.

* Expense ratio. A below-average ratio means there will be more left over for you, the investor, next year.

             ANNUALIZED
            TOTAL RETURN                   INVEST.
Funds   1 YR.   3 YR.   5 YR.   CATEGORY   STYLE

                DECILE RANK           2000
              WITHIN CATEGORY         DOWN   VOLATILITY   MGR.
Funds   '00   '99   '98   '97   '96   MKT.   RANK         SINCE

        MIN.     MAX.   EXPENSE
Funds   INVEST   LOAD   RATIO

Funds

Listings begin on page 71 for U.S. stock funds, on page 91 for international stock funds, on page 95 for taxable bond funds and on page 101 for tax-free bond (muni) funds. Phone numbers for ordering a prospectus begin on page 105.

Except for top-ranked funds found in "And the Winners Are ...," beginning on page 57, smaller funds are excluded from the rankings. We've also left out funds that are less than a year old, that require a minimum investment of $100,000 or more, that are sold only to special groups or institutional investors, or that are available only through IRAs.

When a fund has multiple share classes that are marketed with different fee structures but have essentially the same returns, we usually list only the oldest share class open to new investors.

Total return

Measures the change in the value of an investment, assuming that dividend and capital-gains distributions were reinvested. Returns for three- and five-year periods are annualized-that is, stated on an average annual basis after compounding. Returns, minimum investments and expense data were supplied by Standard & Poor's for periods to June 12.

Expenses (management and 12b-1 fees, if any) are reflected in returns; sales and redemption fees are not. A dash in a three-year or five-year column means that the fund hasn't existed that long. Average returns for various time periods for most fund categories can be found on the foldout pages that begin on page 57.

Category

Reveals how the portfolio manager intends to invest the fund's assets and gives you a sense of how risky a fund may be, at least over the short run.

Investment style

Describes U.S. stock funds by the kinds of companies they invest in most heavily. Companies are divided into large (with a stock-market value of $5 billion or more), midsize, and small (less than $1 billion), and they are characterized as rapidly growing, undervalued or a blend of the two. Thus nine styles derive from these elements: LarGro, LarBlnd, LarVal, MidGro, MidBlnd, MidVal, SmlGro, SmlBlnd and SmlVal. Other styles: AllCap (companies of all sizes), Special (specialized approach), Sector (a single economic sector), Convert (convertible bonds) and Flex (balanced funds).

Decile rank

Shows performance for each of the past five 12-month periods to mid June, ranked 1 (top 10%) to 10 (bottom 10%). Within category shows performance among funds of the same category. All stock funds (or international or bond or muni) measures performance against a fund's entire universe. A decile rank of 5 or 6 is average.

The within-category decile ranking offers a quick gauge of how a fund performed relative to its peers. The decile rankings for an entire universe of funds serve as a reality check: A fund can do quite well within its category but not among all funds within its universe.

Use the decile rankings rather than total returns to gauge consistency year to year. You will rarely find a fund ranked 1 across the row, but most good funds have at least three years of above-average results out of every five.

Down market

For stocks, shows performance during the Nasdaq bear market, March 10 to May 23, 2000. During that span, the Nasdaq Composite index fell 37.3%, Standard & Poor's 500-stock index returned -1.4% and the Dow Jones industrial average advanced 5.2%. This figure indicates the extent to which a fund was invested in high-P/E tech stocks. For taxable and tax-free bonds, the last down market extended from October 5, 1998, to January 21, 2000.