In selecting a mutual fund, many investors will gravitate to name brands, just the same as if they were buying a good dress or shoes. But there is far more to purchasing a mutual fund than that.

Growth mutual funds versus growth and income mutual funds: let's look at the structure of large-cap growth mutual fund consisting of the stocks of 100-150 United States companies whose capitalisation individually is over one billion dollars.

Lots of big companies immediately come to mind, General Electric, IBM, Microsoft, and so on. The description -- growth fund -- means that generally, these companies put all their earnings back into the company process and do not pay dividends. If the decryption had said, growth and income, then we would know that the fund included both stocks that pay dividends and those that do not.

Number of company stocks owned by the fund: Money managers and financial analysts will review the performance of the companies that they would like to include in the roster of 150 companies, and if the company meets their objective, they will buy a certain percentage of the stock.

If the mutual fund comprises a total of 150 company's stocks, each percentage of the holding may be less than one percent, although typically, most funds will usually not hold more than about three percent of one company's stock.

If the stock should really outperform all of the other stocks in the fund, thereby pushing up the percentage to more than three percent, investment managers will sell off some to get back to the three percent holding.

This is an important point because this is one way that overexposure to any one stock is always kept limited. You would not want to be over exposed to Philip Morris, say, after the announcement of the loss of the smoking lawsuits in the US.

Reviewing performance of the mutual fund over time.

There are many ways to examine and rate a fund. I like to look at the last fifteen years performance, averaged out and by each individual year.

If the fund has not been around that long, I at least try to go back as far in years as I can find. A fund that has only been around a short time and looks spectacular, only to nosedive six months later, may run the risk of having impatient investors liquidating faster than new investors are putting money in.

This alone can cause a fund to have rather poor performance, as the manager won't have sufficient funds in hand to buy additional stocks when he/she needs to. Solid, consistent performance and longevity counts.

Rating investment performance in good and bad years. Looking at a long-term performing fund, I compare how well it performed in the good years against the performance of its peer group.

Peer ratings are performance evaluated against other funds of the same type, but held and managed by a different fund group. There are many rating services out there that do that sort of comparison. Again, I want to see how well it performed against its peers in all years. I am particularly interested in historically bad years for the market, 1987, 1991, and 1994, 1998.

(See chart of the dip in September 1998). Many, many funds lost money in those years, but some good funds lost far less and recovered their value a lot faster than most. This tells me a lot about the management and investment philosophy of the Fund Company.

DISCLOSURE By the way, this is not guess work. In the US, Canada, the UK and Germany (the new IX exchange), France and so on, investment firms are required to disclose many stated items to the consumer investor.

These disclosures cannot emphasise good years over bad years, by leaving off all the bad year numbers, for example, and must always say, words to the effect that investing in mutual funds is risky, and investors should review all information carefully.

Fund firms are also required to disclose many other items including their administrative costs and commission fee structures.

Well, why bother looking at old material, you may ask. Because in most cases amazingly, investments that are fully held over time will show positive results, and well, because it is one more criteria for review.

Some funds are consistently solid performers, but note that I did not say top performers. However, they achieve the results that the clients want. A return better than fixed deposits, beats inflation over time.

You will always see in investment professional sales material the statement that "past performance does not guarantee future results''.

*** Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Readers needing specific assistance should seek professional advice from their financial advisor.

Martha Myron CPA CA is a Bermudian who holds a Series 7 NASD license and is a US federally authorised tax practitioner. She is Programming Chair for the International Association for Financial Planning/Bermuda.

Questions regarding this article may be sent to her at 234-0290 or email: marthamyron y northrock.bm CHART