SHOULD YOU AVOID NEW MUTUAL FUNDS? (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

With more than 9,000 mutual funds available, you might think there's not much of a market for new ones. Yet, new mutual funds are introduced all the time. Should you be interested in these funds? After all, there's no track record to study, and you have no way of knowing how consistent the portfolio manager's style will be.

Still, these factors shouldn't necessarily stop you from investing in a new fund, but before you take any steps, get answers to several questions:

* What is the goal of the portfolio manager? As is the case when you're considering any mutual fund, you will want to know the fund manager's goals. If the fund is designed to achieve growth, for example, how will the managers go about it? Will they focus on growth stocks in particular industries or sectors? So they plan to trade frequently, or will they keep their holdings for a relatively long time? Once you know these things, you should have a clear sense of what the manager wants to do with the fund.

* If the new fund is part of a fund family, what is the family's historical investment philosophy? Some mutual fund families have clearly distinct investment philosophies. For exmpale, you could choose to invest with a "socially conscious" fund family. The funds within this family may seek out companies perceived to be environmentally friendly.

* How would this new fund fit into your portfolio? You'll need to evaluate the new fund to see if it could bring something different to your portfolio. Diversification is essential to investment success, so if the new fund would not be redundant for you, it might be worth exploring.

* What sort of performance can you expect from the new fund? You won't have the benefit of knowing how this brand-new fund has done in various market cycles, so you'll have to base your performance expectations on the fund's stated management style and investment philosophy.

Once you've gotten answers to these questions, then you may decide that a particular new fund is right for you. And you may be pleasantly surprised by your choice. One study has shown that new funds, during the first two years of their existence, actually outperform their older peers. Why? For one thing, new funds don't have to sell established positions to avoid realizing big capital gains. And new funds are able to make favorable moves quickly, because they have fewer assets under management. With few assets, new funds also can get greater leverage from their investments that turn out to be winners.

Ultimately, a fund's age is less important than how appropriate it is for your individual needs. So, do your research and make informed decisions. In the long run, it doesn't much matter if a fund is a "rookie" or a "veteran" -- as long as it's right for you.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.