YOUR LETTERS

Editor,

I am interested in stocks, mutual funds, and government bonds. I am sending a check for $29.98 for a subscription to Working Money for myself; I also want to send my friend a gift subscription. Thank you for the sample; I enjoyed Working Money and the informative and easy-to-understand articles. This is one of the few financial magazines I actually read cover to cover and can hardly wait for the next issue.

Priscilla Ceshkovsky
Irvine, CA

INTRODUCTORY-LEVEL TECHNICAL ANALYSIS

Editor,
I have read Technical Analysis of STOCKS & COMMODITIES, The Traders' Magazine [which is also published by Technical Analysis, Inc.--Ed.], in the past and have found the articles interesting but not always practical in application. I recently received a complimentary issue of Working Money and am hooked with one issue. This publication is the perfect blend of technical points and not-so-technical terms. I am subscribing and look forward to my next issue!

A friend of mine has developed a market timing model that attempts to predict short-term bear runs of the S&P. I would like to use this model to sell stocks short or to purchase put options on stocks with highly negative betas. Do you know of any resource or website that has good information on the beta of individual stocks?

Chuck Baddley, e-mail
Tampa, FL

Regarding resources for information on betas, several general financial websites offer the betas of individual stocks. Yahoo! Finance, for one, displays beta values, and websites such as MSN Money Central let you screen stocks based on betas. -- Editor

WHERE TO FIND TECHNICAL DETAIL

Editor,

I'm new to investing and trading. Just received and read the first issue of Working Money. So now I want to see charts! Went to the Vanguard and T. Rowe Price websites, but all their research links give me is box-score information on one-, three-, five-, and 10-year performance percentages. Where can I find charts for mutual funds that look like those in the financial planning article ("Is Your Investment Portfolio Working Hard For You?") on pages 16-19 of the November/December 2000 issue? Thanks!

Gerry Coleman, via e-mail

SAMUEL EISENSTADT INTERVIEW

Editor,

I just received a copy of Working Money magazine for the first time. Find it interesting. Particularly appreciated the wise words from Samuel Eisenstadt in David Penn's interview with him beginning on page 26 of the January/February 2001 issue. Have four dumb questions:

1  What is the best way to get timely Value Line data as discussed (for example, stock groups and so on) for the smaller investor? On compact disc? In print only? At what cost per year?

2  How were the 1,700 stocks chosen? Why those? Was it based on the reliability of their data?

3  On page 32, Eisenstadt states, "I've seen studies that indicate you can probably discard 95-96% of all the data out there...." Reason being: too descriptive and not of predictive value. However, I am surprised that Working Money printed that, although I have to agree with the statement. Most of what we hear or read has no decision-making value to it because context and causality are left out, or if stated, are too trivial in nature to be of any significance. How do I get around that specific problem, besides getting Value Line data?

4  The problem with stocks is that selling on downtrends is not as straightforward as it is in commodities trading. Is there a way for stocks to do that other than options? Write an option on your own stock?

Alex Denhaan
Fullerton, CA

Samuel Eisenstadt replies:

The Value Line survey is available as a printed product or on a CD for $595 per annum. See our website at valueline.com for full details on all our products. The 1,700 stocks in the survey include most of the listing on the New York Stock Exchange, plus numerous American Stock Exchange and Nasdaq listings. They include all the companies in the S&P 500 plus many mid- and smaller-cap stocks. New entries are chosen primarily in developing industries and in companies of interest to our readers.

Several years of history are required in order to develop a ranking on a company. Value Line rankings are derived from a quantitative analysis of each company's long-term record of earnings and prices; recent price and earnings momentum; earnings surprises; and price volatility. These factors are significantly related to future relative price performance -- so they are hardly trivial in nature. Their relationship has been derived through multiple regression analysis covering some 35 years and many thousands of stocks.

Editor's note: Want to learn more about Value Line? Try their "Ask Value Line" e-mail feature (AskVL@valueline.com).

INTERESTED IN WRITING

Editor,

Interesting magazine. Do you have writers' guidelines?

Robert McGarvey, via e-mail

You bet. View them at Working-Money.com. We can also fax them, e-mail them, or mail them to you. Thanks for inquiring.

MUTUAL FUND FEES

Editor,

Thanks for following up on your coverage of mutual fund fees with "Shopping For Fund Fees" by Han Kim and David Penn (Working Money, January/February 2001).

As I stated in my letter to you last month, which I wrote in response to the November/December 2000 article "Making Sense Of Load Funds" [that letter was published in the January/February 2001 Working Money "Your Letters" column--Ed.], I think this article is much needed, but it still misleads readers on the following points:

 1  On page 68 of the January/February 2001 Working Money, you indicate that back-end loads and redemption fees "serve the same purpose." While both fees have the same impact -- that is, both encourage long-term investing -- their purposes are very different. Back-end loads are sales incentives paid to brokers who sell the fund to investors. On the other hand, redemption fees at companies such as Vanguard, for example, are paid back into the fund itself. This compensates remaining shareholders for the trading costs associated with others jumping in and out.

2  On the same page, you also indicate that "operating expenses are periodically taken from an investor's fund account." This is simply not true. Expenses are taken from the fund's total assets, not the investor's account. This impacts the fund's Nav (net asset value), which, of course, impacts the investor, as you suggest. But the investor will never see these expenses deducted from his or her account.

3  On the same page, you indicate that management fees usually run between 0.5% and 1% of the investor's assets. In fact, 0.5% to 1.5% is probably a more realistic range.

4  On the same page, you indicate that management fees might "be reduced as the investment size grows." This implies that the expenses might go down as the investor contributes more money. This is not true; at times, a fund family might decide to reduce a fund's expenses as the fund's total assets grow, but not as the investment of any given investor increases.

Hope Egan, CPA, CFP, via e-mail
Chicago, IL