Path: bloom-picayune.mit.edu!enterpoop.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Making Money In The Mutual Date: Tue, 24 Nov 92 12:40:58 EST Message-ID: <8.1992Nov24.124058@AmeriCast.com> Lines: 86 11/24/92 TITLE Making Money In The Mutual #m#gm#m##m#134 lines w/out pho- to, 128 w/ photo, 118 w photo and graph#m# ASM Fund Is Structured To Track Dow 30 Manager Adler Tells Investors Lagging Index Will Rebound Doug Rogers Portfolio manager Steven Adler is confident that the Dow Jones industrial average will soon be outperforming the general market, as it had consistently during the past 10 years. The shareholders in his ASM Fund hope that's the case, because the portfolio is based upon the Dow average. The Dow this year is up a mere 1%, while the Standard & Poor's 500-stock index is up more than 2%. But for seven out of the past 10 years, the Dow has hadd the upper hand. Through June 30, the Dow returned an average annual 19% for the 10 years, minus the expenses an investor would have paid ASM. The S&P, on the other hand, returned 17.6%. For the past five years, the Dow, less expenses, returned an average 9.6% and the S&P 9.3%. In 1991, the S&P 500 was up 30%, while the Dow rose 24%. In 1990, the S&P returned a negative 3%, while the Dow was down 0.49% for its only negative showing in the past 10 years. The equity funds were down an average 7%, according to Lipper Analytical Services Inc. So far this year, ASM is up about 3.3%, reflecting a 10.7 cent dividend paid June 30. ASM invests in all the components of the Dow Jones industrial aver- age. Each time new money flowing into ASM reaches $50,000, it places equal amounts in each of the 30 components of the Dow. Although it isn't limited to investing in Dow stocks in its pros- pectus, the fund intends to maintain the strategy, says Steven Adler, president of Tampa, Fla.-based ASM. Still, investors would want to keep their eyes on the funds' holdings. It's con- ceivable that Adler may find reason to buy stocks outside the Dow, and the investor could end up with something other than an index fund. Adler argues that the high visibility and simplicity of the fund's investment policy is suited to retirement plans, asset allocation and market timing. Adler also contends that investing in Dow stocks is a good way to invest overseas without leaving the country. Many economists, analysts and portfolio managers are seeing European and Asian economies poised to rebound. Adler notes the Dow companies derive about 50% of their sales from overseas operations, including Exx- on Corp. 75%, McDonald Corp. 35%, International Business Machines Corp. 60% and Coca-Cola Co. 80%. Although the fund, which start- ed in March 1991, holds 30 stocks, Adler argues it's well- diver- sified. "General Electric is really 50 companies in one," he said. "The Dow companies are diversified internally." He also ar- gues that the Dow contains more consumer cyclical stocks, rela- tive to the S&P, which is more weighted toward non-consumer cycl- ical stocks. Adler says an investor buying the S&P is placing 27% of his or her money in the 30 companies that compose the Dow industrials. Adler lays claim to having the only fund who's main objective is to stay invested in the Dow. When index funds were started in the late 70s, the S&P was favored over the Dow because its outlook then was a bit brighter, Adler says. "But that was before pension funds and 401(k) plans came into play," he said. There have been Dow funds before. Lexington started one in 1935, but it is obliged to stay the same, it is now down to holding 23 companies because of mergers and component changes of the Dow over the years. More recently, Templeton closed its Dow fund in 1986 amid tepid response from investors. Adler hopes the Dow will be a bigger draw now. He says he'll be happy if pension managers, now a more dominant presence in the market, place just a portion of their assets with his fund as a diversification move. ASM currently has $17.7 million in assets under manage- ment. ASM carries no sales commission and has capped annual operating expenses at 0.75% of assets. Adler says his fund wel- comes market timers because their business helps lower the cost of investing. ASM waits until cash inflow builds to $50,000 be- fore buying more Dow shares. Adler suggests that individuals put only a portion of their assets - say, 5% to 10% - into his fund as a diversification move. There are good reasons not to put all your eggs in an unmanaged index fund. While their aim is to track the market, investors would hardly boast of such an achievement in a major bear market. While the S&P 500 and the Dow outper- formed the average equity fund during the 1980s, investors perhaps should concentrate on placing a larger amount of their assets in those diversified funds that did outperform the market and that are likely to continue to do so. That means finding funds with proven managements. This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM