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Show TheSalt Lake Tribune BUSINESS Sunday, November1, 1998 Falling Interest Rates Coincide With Market Gainsin Bond Funds Money Scoreboard aes Bank Rate Monitor's surveyof the 10 largest banks and S&Lsin the 10 largest metro areas. Mortgagesare conventional loansat 80 percent loan-to-value. Car loans are for $9,000, 20 percent down, 4&-month. Bondfunds gain new respect as they outperform moststock funds in bear market CHARLESA. JAFFE ' How Many Funds to Buy? You Decide NEWSLAY Looking for double-digit returns for the year so far? Don't look at stock funds. Theonly double digits there have minussigns in front of them. Butif you look at bond funds, you'll find some double-digit returns year-to-date, and some just shy of doubledigits, all aresult of falling interest rates Most bond and money-market fund categories are ahead for the year. But only about five stock groups were up for the week ending Oct. 15 and four of those had been in negative territory the previous week. Utility funds, whose returns are closely tied to interest rates, have been up most of the year and are the leader for the past 52 weeks with an 18.3 percent return, setting tral to the risk-vs,-reward trade-off you make when in‘Too few funds can leave a portfolio undiversified and volatile. Too many typically melt into a costly, hard-to-maintain, no-better-than-average lump. Precisely because the right numberof funds is so difficult to determine,it’s worth study- ing. The latest study was re- leased last week by the Schwab Center for Investment Re- 1 The ‘magic number Schwab came upwith is 10. Or, maybe, four. Or some- where in between. Those 10 funds, according to Schwab,include three diversi- fied equity funds from three different asset classes — largecompany, small-company and international — plus one diver- sified bond fund.For a better chance of beating the market benchmark for an assetclass, cut the three funds down. Fewer funds increase potential rewards — andrisks. Whatthe Schwab study does not consider is what to do with all of those other asset classes, the midsized and micro-company funds, sector funds, interna- tional bond funds and all the rest that many investors use to flesh out a portfolio, “Tf you get beyond 10 funds, you need to sit down and say, “Whatis the role of each fund? What are these doing for me?’” says Mark Riepe, head ” of Schwab's investment re- search group. “Tt’s not that you can’t make a case to own more funds or “cut things up more ways,it’s ~ that the average investor prob" ably has no reason to hold « more, and is prebably hurting performance if they do.” If you ‘have more than 10 funds, © Riepe suggests trying to elimi~ nate overlap in your portfolio. And therein lies the real problem:deciding whatto get rid of to slim down your hold- ings. The price of bonds moves opposite interest rates. Tf you own an existing bondandratesfall, the price of that bond rises, which is why bond prices have moved up. For example, if you bought a 30-year Treasury bondthat yielded 6.74 percentin July 1997 and the yield is now 4.98 percent, you have a gain of 28 percentof the bond’s value — plusthe interest, or about 30 percent in 16 months, said bert Auwaerter, senior fixed-income portfolio manager of The Vanguard Groupin Valley Forge, Pa. Federal Reserve Board Chairman Alan Greenspan has indicated further short-term rate cuts may come. That will hurt people who own money-marketfunds, said James Conroy, managing directorof fixed incomeat Salomon Smith Barney. Somewhatcautious aboutlong-term bonds, which are the mostvolatile, is Kevin McClintock, director of fixed incomeat Dreyfus Corp. in Manhattan. ‘‘Although rates are headed lower, long-term bonds are going to stay risky,” he said, because long-term bonds are more volatile and sensitive to smaller changesin interest rates. He also warns about buying mortgaged-backed se- curities as interest rates fall. “There will be astro- Navajo Elders Support Selves With Rug Sales @ Continued from E-1 Last year, they sold more than 300 rugs and raised an estimated $100,000, says Lisa Wishnick, who volunteers for the show.It’s difficult to pinpoint exactly how much is made during the show because elders are paid directly for their rugs or jewelry. More than 100 volunteers will help with this year’s show, which runsNov.6-8. Myers says her work with the elders has shown her an economy caught between bartering and capitalism. One elder who wants to attend this year's sale does not have a way to get there and wants to trade a rug for a pickup to drive to the show. On the reservation, pawn shops serve as Navajos’ banking system. Elders pawn jewelry for money to purchase basic items. They pawn their valuables for safekeeping. Whentheysell rugs, they buy supplies and redeem their pawns. ‘Whenthe money runs out, they might pawn more goods. “Tt is their system. They would “What is most important is how your funds are the same or different, not how many you own,” says Chennault, a computer administrator at Kansas City Kansas Coramunity College, who developed Overlap to determine the Mortgages past 12 months has been targeted maturity funds, invisible interest. Soundslike easy money, but these are very volatile instruments and, like all bonds, if you have to sell them before maturity and the market is against you, you can lose lot of your principal. But with interest rates falling, targeted maturity funds, like most bond funds, have enjoyed a great run. Salomon Smith Barney’s Conroy expects that returns on Treasury funds will slow to about 8 percent to 10 percent over the next year even as rates dropa little further. Before we go, we have to offer the usual caveat: Bond funds are not bonds. You buy bondsto get return of principal more than return on principal, and youget guaranteed return of principal, interest rate and maturity (barring the rare default), none of which you get from a bond fund. rather do that than go to a bank,” Myers says. Nearly 250 traditional elders from seven areas on the Navajo reservation take part in the Adopt-A-Native Elder program. Forty of the elders are between 90 and 115 years old. Many elders’ eyesight has dimmed to the point that making rugs is nearly impossible, but they still spend hours weaving. One woman, virtually blind, makes small rugs. “As long as we give her yarn,” Myerssays, ‘“‘she will weave.” Mostrugstake a few weeks to a few months to weaveandsell for $50 to $2,000. In rare cases, they can fetch as much as $5,000 for a fiawless rug that has taken nearly a yearto create. Withoutthe annualsale,theel- ders rely on a simple means of marketing — bartering for goods at a trading post, or perhapsselling at towns bordering the sprawling reservation. “They could take a couple of years to sell a rug at a trading post,” says Wishnick. If selling rugs means economic survival for the elders, weavii them means spiritual fulfillment. important clients, _—______—_-?® Many elders start and finish each rug with prayers. Some rugs must include prayers. Before starting, elders meditate and pray for a design to weave. As part of her prayers, Yellow Hammer, 64, might burn cedar chips andask for a blessing to prevent arthritis and keep her eyes sharp. “T just ask for a vision to give me the guidance,” shesays. Gathering materials for the rugs has not changed in hundreds of years. Elders extract dye by boiling plants and rocks foundin the desert, a process Yellow Hammersays leaves her hands rough 13.83 13.83 16.96 Bank deposit rates Bank Rate Monitor's weekly surveyof the 10 largest banks and S&Ls in the 10 largest metro areas. Date MMDA* 6-months 1-year 2-1/2-year This week 2.45 4.30 Last week 2.46 4.35 Lastyear 2.65 4.88 * Money Market Deposit Accounts 439 4.47 5.16 5-year 4.44 452 5.36 458 4.64 5.61 Yields on biggest money funds | Here are the 15 biggest money-market mutual funds open to individuals with their current seven-day annualized yields. Fund (ranked bysize) Merrill Lynch CMA Money Fund Smith Barney Cash Port/Class A Vanguard MMR/Prime Port Fidelity Cash Reserves Schwab Money Market Fund Schwab Value Advantage MF Centennial Money Market Trust MorgStan DeanWit/Liquid Asset Merrill Lynch Retirement Res. MF Dean Witter/Active Assets MT PaineWebber RMA MF/MM Port Prudential/Command Money Fund Fidelity Spartan MMF Alliance Captial Reserves Stagecoach Money Market Fund Avg. taxable money fund Tax-free funds This week 4.70% 4.85% 5.13% 5.01% 4.74% 5.09% 4.82% 4.94% 4.81% 5.02% 4.88% 4.73% 5.05% 4.38% 4.65% 4.60% 2.69% Last week 4.78% 4.89% 5.16% 5.06% 4.78% 5.13% 4.89% 4.97% 4.88% 5.06% 4.96% 4.80% 5.10% 4.42% 4.67% 471% 2.79% ‘Source: Money Fund Report 6 mos. ago 5.07% 4.98% 5.32% 5.20% 491% 5.26% 4.97% 5.09% 5.19% 5.20% 5.13% 5.05% 5.23% 4.66% 4.91% 5.00% 3.47% Gannett News Service keeps churros for the quality of wool. After shearing the sheep, she spins and dyesthe wool. On a good day of eight hours work, she will complete about 5 inches of weaving. “It has to be perfect. You are so relieved when it is done,” she says. Wishnick estimates the cost of presenting this year’s show at last day of vacation, she went shopping in Park City and saw pictures of Navajo elders at Myers’ co-op art shop. That's all it took, She and her partner, Robert Threet, “adopted” Carol Black- horse. At 83, Blackhorse has had cataract surgery and does not weave as much as she once did. But Bergh will bring Blackhorse, hertwosisters and their children $42,000,all donatedin cashorin- water or electricity. ders hasilluminated a culture and weaving from her mother and grandmother, says 30 or 40 sheep can provide wool year-round. She Bergh, who runs a family business and works at an Atlantic City casino, joined the effort six years ago while skiing in Utah. On the lifestyle about wool. Yellow Hammer, who learned of the show. Bergh will pay for lodging for the whole family. “One year we rented a condothatslept six. By the time everybody got there, we had 15 of us,” Bergh recalls. She and Threet travel to the reservation and stay with Blackhorse and her family in one of their hogans, 50 miles from the nearest phone with no running Her involvement with the elBergh knew nothing “Tt certainly changed mylife,” she says. Introducing the “Compare Us To Your Broker...” ee ame sme ime SMART LOAN... A. a home owner youhave access to one f the most affordable loans available anywhere a Home Equity Loan. A Home Equity Loan can be a Smart Car Loanto finance your next car. Not only do youget a great interest rate, but the inter est youpay is usually tax deductible. (With thetax deductibility vour actual interest rate will usually be less than the best car loan interest rate in town), In addition, you can finance the car for 5 vears or more. + A Home Equity Loan can be used to buy just about anything. Pay for home improvements, your children’s education or for investment purposes, Call a Loan Officer Redeemable at: Baci Trattoria & « Cafe exposMarker St. BroxGr ‘Oyster Bar’ » New Yorker" poend Inc. Call for'a Free Copy of “YOUR GUIDE TO COMMISSION SAVINGS” Touchtone & Internet Trading ‘www.discounthroker com 2880 S. Main St., #117 466-6122 1-800-619-SAVE(24-hours) SOLE Development Conference 3 card from New Jersey. Elders who cannot afford, or The Perfect Holiday Gift for Business and Personal Giving. ATTENTION BUSINESS OWNERS F 15.11 15.13 15.46 People from across the country volunteer for the sale and to help the elders. Sandi Bergh will travel colors must be used in rugs — black, red, gray and white. They mix dyes to produce other hues. *A PRIVATE CLUB FOR MEMBERS. 3 Credit 889 890 928 are too old, to tend sheep must buy wool for weaving. Profits from the rug sale help them buy as scrub brushes. Four natural = 8eee hi = 5.55 556 557 Personal up for this year’s show. ae Baggies 640 641 687 Car kind by individuals, foundations, businesses or grants. Space to conductthe sale is donated, lodging for elders and their familiesis provided at no cost, donations or grant moneyhelppayfor food for elders and their families during their stay in Park City. Myers expects to feed 85 Navajos each day Ss : ‘is3F& #2a i ttt I 7 E al A Ry : i " A i i} pu 30-year 15-year ARM Thisweek 6.79 Lastweek 6.78 Lastyear 7.25 The top-performing bond fund category for the GastronomyGift Certificates rh shale Heise&Prey ore Safety Inspection. Calt for Details. Date lowerrate environment.” with a 17.25 percent return. These are basically zero-interest coupon Treasury STRIPS (which stands for Separate Trading of Registered Interest and Principal of Securities) sold at a discountwith a preset maturity date and payback. For example, said Casey Colton, who, with David Schroeder, manages seven such fundsfor American Century Investments in Mountain View, Calif. “You might pay $75 a share, but you knowyouwill get back $100at a fixed date, say 2005." The bonds pay no actual annual interest because you are buying them at a discount “These are very goodif you need a certain amount of money at a certain time, to pay for college or for retirement,’ Coltonsaid. “You know the moneywill be there.” If you are using them for retirement, you may want to hold them in a tax-deferred account such as a 401(k) or IRA so you don’t pay taxes on the Others peer nomical rates of mortgage prepayments if rates drop, and youwill get your moneybackto invest in a ponomen : and al of = #4 new car. Personalloans are for $3,000 24-month unsecured loan. 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