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No matter how long you have been investing in mutual funds, it pays every once in a while to step back and recall what attracted you to them in the first place.

This sort of appraisal can help you decide how to deal with your present and future fund investments - and maybe even when to consider putting your money somewhere else.The mutual fund format has many virtues that have contributed to its dazzling success over the past couple of decades, including diversification; easy-in, easy-out liquidity; convenience; professional management; and access to many types of investments that are otherwise out of the reach of small investors.

Many stock funds have always boasted generous amounts of these attributes, which goes a long way toward explaining why the stock market was the first arena in which funds gained a following.

For an ante of a few hundred to a few thousand dollars, or less than the price of a 100-share lot of many individual stocks, investors could buy a part interest in a professionally managed, diversified portfolio of stocks.

They were still exposed to the ups and downs of the market, but they had much less to fear from sudden misfortune striking a single company.

Money market funds, which first began to appear in the early 1970s, have likewise been a smash hit. They gave small investors access to short-term interest-bearing securities like commercial paper issued by corporations that had previously been out of their reach.

The third main category, bond funds, has also attracted millions of investors over the years. But its benefits have come under more critical scrutiny in the mid-1990s.

"Bond funds have a number of advantages over buying individual bonds," says Sheldon Jacobs, publisher of the No-Load Fund Investor advisory letter in Irvington-on-Hudson, N.Y.

"But there are two significant disadvantages. Unlike individual bonds, you can't hold bond funds to maturity and be guaranteed face value. The cost of management in bond funds may put them at a yield disadvantage vs. individual bonds."

In some kinds of bond funds, Jacobs suggests, the value of diversification alone can outweigh these drawbacks. In high-yield junk bond funds, for instance, "diversification is essential and management expertise is critical," he says.

Similarly, a professional diversification plan is the core principle of flexible bond funds, which mix together bonds of different types.

In municipal bonds, Jacobs says, small investors may be best off buying funds, while people with larger amounts of capital may be more inclined to buy top-rated individual munis directly.

The hugely popular area of government securities, especially Treasury bonds, in some ways is the least amenable to the mutual fund format.

"Since Treasuries have no credit risk, there is no point in diversifying among them," Jacobs says. "If a Treasury fund does not actively manage its maturities, and most do not, then the portfolio manager is not adding much value."

Furthermore, he says, liquidity is less of a problem for direct owners of Treasury bonds than other types of bonds.

If you can sometimes make a case for investing in straight Treasury bonds, especially dealing direct with the government and thus avoiding commission costs, the same logic might be applied to short-term Treasury bills in comparison to a "Treasury-only" money market fund.

And of course, investors in large numbers who have the capital and the inclination still choose to buy stocks directly rather than stock funds.

When you spot a company with promising long-term prospects that you understand well, maybe its stock is preferable to any fund as a place to put money you can afford to risk.

Instances like these don't in any way diminish the appeal of mutual funds for millions of investors with many different goals.

What they do provide, though, is a reminder to look closely enough at every fund investment to gauge its real merits. In Jacobs' words, "Ask whether you are really getting the benefits you're paying for."