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GAMBLERS RISK YOUR MONEY, BOOK CHARGES

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In his new book, "Surviving the Coming Mutual Fund Crisis: How You Can Take Defensive Measures to Protect Your Money" (Little Brown & Co., $22.95), Don Christensen suggests that gamblers have infiltrated the fund industry and are playing some very risky games with your money.

"Their speculation will ultimately come back to haunt mutual funds and ultimately cause severe dislocations, panic and losses," according to Christensen.Christensen believes that high-risk strategies are priming funds for a crisis similar to those experienced by the "go-go" funds of the 1960s and the investment trusts of the 1920s. Among the strategies that bother him most: 1. using leverage or margin, 2. short selling, 3. overconcentrating capital in a few sectors, 4. using futures, options and commodities, 5. investing in unseasoned companies and restricted securities.

Christensen suggests eight survival rules all fund investors should follow. In a recent issue, IBC/Donoghue's Moneyletter (290 Eliot St., P.O. Box 9104, Ashland, Mass. 01721) reiterated these rules, agreeing with some and disagreeing with others.

1. Never invest in a stock fund with an annual portfolio turnover greater than 100 percent. Christensen feels that high turnover often produces high risk. IBC/Donoghue agrees.

2. Don't invest in nondiversified funds. Christensen isn't necessarily worried about sector-specific funds but nonsector funds with highly concentrated portfolios. IBC/Donoghue isn't so sure. "Many portfolio managers believe the best way to control risk is to become intimately familiar with the companies they invest in," it says. "It's impossible to be intimately familiar with more than 30 companies."

3. Never accept an expense ratio higher than 1.25 percent. An ironic reality of Wall Street, says IBC/Donoghue, is that the highest-risk products have the highest expenses.

4. Avoid all funds engaged in historically high-risk tricks.

5. Pay close attention to proxy statements.

6. Don't invest in funds whose boards of directors have less than 50 percent independent directors.

7. Make sure your fund has a "cash-only" redemption policy.

8. Don't buy shares of closed-end funds.