Will All That Fund Sizzle Turn To Smoke?

Mutual-fund investors have plenty of reasons to be merry as 1995 draws to a close. The average equity fund turned in a total return of 24.2% for the year, compared with -5.3% a year ago. And bond funds were no slouches, with taxable funds gaining 14% and tax-free funds rising more than 15%. A Scrooge could note that actively managed mutual funds didn't beat the 37.6% return of the Standard & Poor's 500-stock index. But the 1,667 U.S. diversified equity funds, which by their nature tend to track the indexes, are up 31%. In fact, almost half of the mutual funds in Morningstar Inc.'s 6,026-fund universe had gained 30% or more as of Dec. 8.

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