Newspaper article THE JOURNAL RECORD

Mutual-Fund Investors May Face Quandary in '90S

Newspaper article THE JOURNAL RECORD

Mutual-Fund Investors May Face Quandary in '90S

Article excerpt

As they plan their strategies for the 1990s, mutual-fund investors might well find themselves in a quandary.

Should they place their bets on aggressive stock funds, hoping that the next decade will keep up the bull-market dramatics of the '80s? Or should they take a more defensive approach, reasoning that less ebullient times lie ahead?

For the ordinary mortal not equipped with the power to foresee the future, advisers say a compromise could be in order - a fund that pursues the dual objectives of growth and income.

Funds in this category invest heavily in the stock market. But they generally shy away from shooting for big winners in speculative, high-risk issues.

Rather, they tend to focus on established blue chips and other staid stocks whose size and record suggests they are unlikely to experience a sudden nosedive.

In addition, many of those stocks offer more generous dividend yields than can be found in younger companies, which keep most or all of the money they make to plow back into the business for growth.

A healthy dividend yield theoretically provides support should the stock market in general run into a prolonged period of weakness.

Sounds pretty good, doesn't it? One brokerage house goes so far in its current promotional literature as to bill growth-and-income funds ``the best of both worlds.''

``Looking for long-erm growth of capital AND income, without excessive price volatility?'' it says. ``Growth and income funds may be for you.''

The skeptical reader might detect a whiff of exaggeration in any claim of that sort. Normally, to get high dividend income, you have to accept relatively modest prospects for capital gains, or vice versa.

As in any compromise, in other words, you expect to give up something to get something in return. Lately, however, growth and income funds have been defying that time-honored logic. …

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