FOR IMMEDIATE RELEASE 2000-7 New SEC Mutual Funds Tips Remind Investors To Look at More Than Short-Term Past Performance "Buy and Hold" Beats Switching In and Out of Funds Washington, DC, January 24, 2000 -- Following an unprecedented year in which a record number of mutual funds posted gains of 100 percent or higher, the U.S. Securities and Exchange Commission today issued tips to remind investors that past performance should never be their only guide when choosing funds. In addition to reading the prospectus and shareholder reports, the SEC recommends that investors assess a fund's costs, which can have an enormous impact on returns. For example, a one percent higher annual fee will reduce a fund's ending balance by 18 percent after 20 years. The SEC's mutual fund tips also suggest that investors consider a fund's size, tax consequences, risks, and volatility. SEC Chairman Arthur Levitt said, "Chasing fund performance is often the quickest way to hurt your mutual fund returns. Investors should comparison shop for funds that best match their long-term financial goals and tolerance for risk." "Investors who buy `hot' funds risk getting burned," said John Gannon, Acting Director of the SEC's Office of Investor Education and Assistance. "We hope these tips will help investors consider all the relevant factors when they buy mutual funds." A record 177 mutual funds posted returns of 100 percent or higher last year, according to an industry survey of fund returns since 1970. Prior to 1999, no more than six mutual funds had doubled their investors' money in the same calendar year. High-performing funds often fail to repeat their gains, and investors who switch in and out of funds typically experience significantly lower returns than those realized by "buy and hold" investors. The SEC's tips also emphasize that the short-term performance of relatively new or small funds can be especially difficult to repeat, because the fund's investment in select initial public offerings or a few successful stocks may have exaggerated the fund's gains. Individual stocks have less of an impact on larger funds than they have on smaller funds. In addition to comparing past performance, the SEC recommends that investors: * Scrutinize the fund's sales charges, fees, and expenses * Know how the fund impacts their tax bill * Consider the age and size of the fund * Think about the volatility of the fund * Factor in the risks the fund takes to achieve its returns * Ask about recent changes in the fund's operations * Check the types of services offered by the fund * Assess how the fund will impact their portfolio's diversification The SEC's mutual fund tips are available on the "Investor Assistance" section of the Commission's website <>. The site also features the SEC's Mutual Fund Cost Calculator, which helps investors compare the long-term impact of fund sales charges, fees, and expenses. # # #