Wall Street Journal and which she has used a public information advertisement.

Call it a quirk of the mutual fund industry, but the phenomenon is here to stay. A fund makes its way to the top of the performance charts prompting new investors to deluge the fund with purchase orders. Then, the fund returns to mediocrity or worse. Funds that were hot in one cycle have been known to fade out of existence in the next. Even if a top-ranked fund continues to do well, it still may not be the right investment for you. To avoid owning the wrong fund, there are ten questions to ask before you buy a fund with a strong track record.

1. Is the Fund's Objective in Line With My Own? One can buy a top-ranked money market fund or the best performing bond fund, but if you need growth, these investments aren't going to do you any good.

Alternatively, if you need to protect your capital or want income, buying a stock fund that suddenly drops by 25 percent is a big mistake.

2. Is the Fund Too Risky? Looking at how well a fund performed in periods when stock prices fell will give a potential investor an idea of a worst-case scenario. Checking the fund's performance in the fourth quarter of 1987 and the third quarter of 1990 will provide a good indication of risk. If the loss that was experienced is more than you can take, you should look at other offerings.

3. Is the Fund's Investment Style a Duplicate of Another Fund in My Portfolio? Fund analysts say most stock-fund investors should own a diversified portfolio that includes a mix of funds such as foreign funds, small-company stock funds and regional funds. If a well-run fund matches the investment style of another top-performing fund which you already own, you may want to ignore it. If you own five funds that have the same investment style, you are not getting the benefits of diversification.

4. How does the Fund's record compare with funds of a similar investment style? It is important to compare apples with apples and oranges with oranges. For example, an emerging market fund could have returned 106 percent over the five years ended 1993, easily ahead of the 98 percent average gain for diversified US stock-mutual funds. But if you compare its record with that of other emerging market funds, this one would have had the poorest performance of the group of emerging market funds around for the five-year period.

5. Has the Fund Been a Consistent Performer? A US stock appreciation fund surged 148 percent over six calendar years, easily outpacing the 130 percent return for the Standard and Poor 500-stock Index. But the cornerstone of this fund's record was an astounding 77 percent gain in 1991. If you were in for the 1991 rise you would have had a fine return. But if you missed calendar 1991, you got uninspired returns.

Consistency of performance is very important. It increases the likelihood that you will remain invested and realise the benefits of owning that fund.

6. Are the fund's results good because of good management? If a fund with a strong performance record is invested in a broad selection of stocks, that fund's strong performance is more likely to continue. Fund analysts say you should be a cautious of stock funds that do well because they are invested heavily in a single stock or industry group. If a fund has a third of the assets in one stock and that stock has a poor performance, the fund won't do well either. Sometimes money market and bond funds propel themselves to the top of the performance charts by deciding to waive a portion or all of their annual expenses. Be sure the fee waiver is likely to continue before you buy.

7. Is the Manager Who Produced the Fund's Result Still There? If the fund has done well under the management of a "star'' you should ask if that person is still responsible for the fund. When there are changes at the top, the issue of uncertainty becomes a factor. Funds in many cases are trying to eliminate the "star'' factor by introducing the team approach. By doing this, should a key person leave, the effect may be largely invisible.

Nonetheless, the question needs to be answered.

8. Has the Fund Outgrown Its Ability to Perform? Size becomes critical with funds that buy smaller-company stocks. Small stock funds with over $250 million can become difficult to manage. Large company stock funds are not usually affected by a size problem. Fidelity Magellan is a classic example. It is a $30 billion fund and keeps having great returns.

9. Is the Fund's Success a Result of Income or Capital Gains? If you are a retiree looking to have your mutual fund provide spending money, you may want to buy stock funds that make big income distributions each year.

This is often the case with equity-income funds and growth-and-income funds.

By investing solely in bond funds for income, you run the risk of not having your portfolio grow and actually shrink in size due to inflation.

10. Are the Fund's Fees and Expenses Reasonable? There is nothing worse than buying a top-performing fund that turns into a dog, and the pain can be made even more excruciating if you have paid a premium for the privilege. Ensure that a fund's expenses are in line with the industry standard.

Anne Kast is the owner of Kast Investment Management Ltd. and has more than 20 years experience in the investment management field.