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Mutual funds sales have surged significantly since the beginning of 1991, resutling in one of the largest increases the market has seen.

And the increase in mutual fund buyers over sellers helped fuel last year's stock market rise. Jim Milligan, mutual funds marketing director and portfolio manager at Wasatch Advisors, Utah's only mutual fund, believes a better educated clientele is at least partially responsible."People realize diversification is the key element to investing," Milligan said. He described mutual funds as less aggressive than stocks and said mutual funds do better in the long run because diversified portfolios decrease risks. (Portfolios reflect the areas and percentage of investments such as bonds, stocks and occasionally, real estate.)

Milligan also believes buyers are becoming more aware of mutual fund options through newspapers or business magazines that write positively about mutual funds.

The economy could be another factor in the buyer influx. "It (the economy) gives people a reality check and they say, `Hey, I need to get planning,'" he said. Also, with low interest rates, people are looking for a better return, said Wendy Thompson, vice president and branch manager at Salt Lake's Charles Schwab & Co Inc.

Mutual fund investments can be purchased either through a stock broker or specific mutual fund advisors. Milligan believes the key difference is incentives and who makes the decision. "A broker makes money by buying stocks, but doesn't make or lose money if the stock goes up or down." Brokers also charge for advice, he said.

But that isn't the case at Schwab, Thompson said, and charges differ from broker to broker. Schwab recently began offering more than 80 of their 600 mutual funds, involving 90 fund companies, without transaction fees.

She believes the difference between buying funds from a broker versus a mutual fund advisor is that advisors require a letter before trades can be made, causing delays. In addition, advisors send one statement for each mutual fund, but brokers consolidate investments into one statement.

Mutual fund firms are fee structured and asset based, meaning the agency takes out a percentage of the client's assets. As the the client's funds become more valuable, the advisor's revenues increase. Wasatch shoots for a yearly 15 percent growth rate. About 90 percent of the funds usually go up and make money, Milligan said.

"People aren't aware we make money when they do and we lose money when they do," Milligan said.

The two major types of mutual funds are load funds and no-load funds. Stock brokers generally sell loads, Milligan said, which is where the client pays an up-front fee, capped at 8 1/2 percent. Also, load funds contain a new hidden fee (hidden because load fees are generally up-front fees) called the 12B-1 asset based fee, which is used for marketing, or finding more shareholders.

No-load funds don't have any up-front fees. Another fee buyers should beware of involves backend load funds that contain a contingent deferred sales charge. The sales charge percentage decreases the longer buyers stay in a particular fund but many don't find out about it until they're ready to sell, Milligan said.

Mutual funds trade on an institutional level in large amounts and subsequently are able to buy stocks at cheaper rates, or at a wholesale level versus retail, Milligan said.

Wasatch, whose fund was up 50.4 percent last year, manages money for large companies and requires a minimum of $300,000 on individual accounts. But funds can be pulled together so individuals can get the same benefits as a large corporation, he said.

Compared to money markets, which are generally short-term, mutual funds are a long-term investment, and often used as a basis for retirement funds.

"The longer people are in the market, the better chance they have of making money. They need to be in the market long enough to endure the downslides and enjoy the peeks," Milligan said. And nobody knows when those downslides or peaks will be. The market is unpredictable, even for experts, he added.

In Utah during 1990, $698 million was invested into mutual funds, compared to double that amount in 1991, or more than $1 billion. For the first two quarters in 1992, Utah mutual fund investment has surpassed $425 million.

Twenty-seven percent of baby boomers, born between 1946 and 1956, currently own mutual funds. Firms control 42 percent of the mutual fund market.

But there is only one Utah based mutual fund. "I can't believe there aren't more mutuals in Utah, especially with Utah rates as a great place to live. Firms can afford not to charge people as much because there's not much overhead compared to someplace like New York," he said.

In looking for a good mutual fund, Milligan said magazines and rating services are reliable. "If rating services say they are good, trust them. There's a lot of brain behind rating mutuals."