OnlineHost: Copyright 1996 Consumer News, Inc.; licensed to America Online, Inc. OnlineHost: Your host for tonight is AOLiveMC2 (HeatherAMP). AOLiveMC2: Please join me in welcoming Gene Walden! Welcome also to RL RDPaton from our Real Life Department! GWalden100: It's a pleasure to be back. RLRDPaton: Gene, I have had the pleasure of reading your book and found it invaluable. GWalden100: Thanks. I did my best. RLRDPaton: It was certainly good enough. GWalden100: It was thousands of hours of research and writing. AOLiveMC2: Gene, are you ready for some questions? GWalden100: Absolutely. Question: What kind of advice can you offer a first-timer in the military, one income family? GWalden100: The best advice is to just get started. Buy a broad mutual fund -- like a growth fund -- with a solid track record for the past five years. Follow it, and build a portfolio from there. But the key is to take that first plunge into the market. It always gets easier after that. Question: Are any of the funds recommended index funds? Is there an asset allocation recommended? GWalden100: There are no index funds (funds that follow a specific index like the Dow Jones Average or the Standard and Poors 500) in my top 100 because they mirror the market but rarely exceed it. My top 100 all beat the market over the past five years. As for an asset allocation, that's a complex question I'll try to answ r later in the show. Question: What constitutes a "top 100" fund? returns? NAV? RLRDPaton: Gene, mutual funds have been around since 1924 and certainly run the gamut -- go-go, sectors, hedge, index, and so on. Don't you think the best is to choose one with a solid track record through thick and thin? GWalden100: Absolutely. I didn't realize they had been around that long. But they've certainly had their greatest growth since the 1970s. There are now over $3 trillion in assets in mutual funds. These ratings of the best stocks for bull markets and bear markets I believe are rather silly, because you never really know whether you're entering a bull or bear market unless you have a crystal ball. RLRDPaton: Great for you and very well said. Just be there, that is the key, not to try to second guess the trends. Mutuals are for the long pull, as you have so aptly said. GWalden100: Then I looked at year to year growth. I wanted funds that out-performed the market year in and year out -- consistency. And finally, I looked at fees and whether the current fund manager was the same manager who established that 5-year record. RLRDPaton: Yes to the fees, especially the internal ones, i.e., the expense ratios. Question: Are gold funds already too high to get into now? GWalden100: I don't care for gold funds. These are not working assets like stocks. It's a just a roll of the dice. Long term, they are poor performers. Question: Good evening Mr Walden. I've recently invested in a Pacific Rim mutual fund for the long term for my daughter's college education. She was just born less than a year ago. Is this a wise decision, or would I be wiser to go with US investing? GWalden100: I think you need to diversify. I like the Pacific Rim long term. I too own such a fund, but you would be doing your daughter a disservice not to also put some money in a US. stock fund. There's plenty of growth left in this market as well. Question: What is your opinion of international funds given their not so great performance in '95? Any particular regions? GWalden100: I like them. The reason you invest internationally is diversification. You are investing in regions that don't mirror the US. market. Sometimes they trail, sometimes they exceed. Long-term, the international market has outperformed the US. In terms of regions, I like the Pacific Rim and Latin America, but both are volatile. I think you should also be in a broad international fund. RLRDPaton: Gene, the book you wrote should be on everyone's investment shelf. AOLiveMC2: Can you elaborate on the difference between growth and balanced funds? GWalden100: Growth funds invest strictly in growth stocks such as Coca-cola, Merck, Medtronic, etc., while balanced funds invest in both stocks and bonds. Question: There are hundreds of funds, how does one begin to research one? GWalden100: I guess that's what I liked about my book. With nearly 7000 funds out there, what I have done is narrow the field to 100. But there are also other resources -- such as MourningStar (on AOL), and several magazines that do annual fund ratings. Question: I'm considering investing in AIM Constellation or Stein Roe Capital Oopportunities. Any recommendations? GWalden100: AIM Constellation ranked among the top 20 funds in my book, while Stein Roe Cap. Opportunities didn't make the list at all. So I'd go with AIM Constellation. RLRDPaton: The same for the Kaufmann group? GWalden100: The Kaufman Fund ranked #3 on my list. It's very aggressive and somewhat risky, but it's had tremendous performance -- 26% per year the past 5 years. RLRDPaton: What % should be in that sort of aggressive fund in your opinion? Question: How do you rate Fidelity Contra Fund for an investment tool for college for a now two year old? GWalden100: This AOL crowd is a smart bunch. Fidelity Contra ranks among my top five. Should be a good fund for any age. Question: Where can I get the list of 100 best mutual funds? GWalden100: In terms of aggressive equity funds (I'll get to that list in a minute), I think it depends on your age. If you are young, you should have maybe 30 - 40% in aggressive funds, if you are retired, you should have maybe 20 percent. RLRDPaton: Thanks. GWalden100: Where can you get the list of the 100 Best Funds? It's in my book, which should be in libraries or book stores, and may even be available through the AOL store, or call 800-736-2970 to order it. Thanks for asking. Question: What do you think of Templeton family of funds? GWalden100: It used to be a premier family, but is now rather average. Not one of their funds made my top 100 list. Question: I have approx. $ 25,000 in six different funds -- mostly Fidelity. How many funds are too many? RLRDPaton: Would it be reasonable to use growth as an objective and skim off the appreciation for income? GWalden100: Number of funds is not an issue. Whatever you're comfortable with. Try to get some diversification. And then go from there. 10-15 funds is not unreasonable (but probably not necessary either). Question: Why has 20th Century Gift Trust done so poorly lately? GWalden100: Don't worry about short term performance. 20th Century Gift Trust is a very aggressive fund that has done phenomenally well for the long-term. But it will be volatile. This is a fund you buy for the long term, and hold. Question: What criteria do you look for when deciding between load and no-load funds? GWalden100: Very easy. If they have had similar past performance (over 5 years or so) I'd buy the no load every time. AOLiveMC2: Do you have any no load funds on your top 100 list? GWalden100: My top 100 has about 60 no loads. But there are also some great load funds that are probably worth paying a load for. You''ll almost always have to pay a load for a sector fund and for an international fund. The Fidelity Contra fund is also a load fund, but it's performance has justified the load. GWalden100: Let me talk on sector funds. Sector funds are funds that invest in a specific area of the economy. The past six years, the very best performing funds in the market have been high tech sector funds. But there are also retail funds, bank funds, chemicals funds, auto funds, etc. The only time I would by a sector fund is if already had broad diversification in other funds. Question: What do you recommend -- Fidelity Magellan or Vanguard 500, for 401K? GWalden100: I don't know Vanguard 500, but Fidelity Magellan ranked in my top 100. GWalden100: The question on a family funds -- I don't think putting all of your money in one family is a great advantage. I say buy the best funds regardless of the family -- even if it means buying funds from several different families. Question: I'm 25 years old, and interested in investing. I'm still a college student, and don't have very much money to put into any real big investments. What kind of options do you suggest I explore? GWalden100: There are several families of funds that allow you to invest as little as $250 to get started. Find one of those funds with a good track record and get started. RLRDPaton: Gene, How do you feel about starting a fund and then continuing with regular investments in the same fund as your capital allows? GWalden100: I think it's a great idea. Dollar cost averaging --- which is to invest a set amount each month or each quarter -- is a great way to beat the market because you are buying more shares when the market is down and fewer shares when it's up. Just keep putting money in, and over the long-run you'll make barrels of bucks. RLRDPaton: Like making a mortgage payment to yourself. GWalden100: Exactly. You're paying yourself instead of the bank. In fact, most funds can have the money automatically withdrawn from your checking account each month or each quarter. Question: Are all your investments in funds rated in your top 100 or are you invested elsewhere also? GWalden100: I don't offer a lot of info on my own investments, but I do have some money in international funds. Keep in my I'm also the author of the book The 100 Best Stocks to Own in America (now in its 4th edition) so I know a little bit about the stock market too. That's where I put most of my money, but for many investors, mutual funds make a lot more sense. They're so easy! Question: AOL has Vangard Fund info on-line, is this one possible recommendation? GWalden100: There are a lot of Vanguard Funds. It depends on which one you're interested in although I don't think any made my top 100, but a few made my honorable mention list. Again to find my book on the 100 Best Mutual Funds to Own in America -- it's in book stores, I think it's in the AOL store, or you can call 800-736-2970. Thanks. AOLiveMC2: Thank you Gene and RLRDPaton for a very informative evening! RLRDPaton: Gene, your book is a GREAT investment. GWalden100: Thanks. Once again, it's been a great pleasure. AOL has some savvy subscribers. Good night. AOLiveMC2: Thanks to a great audience! Goodnight! OnlineHost: Copyright 1996 Consumer News, Inc.; licensed to America Online, Inc.